London has no “God given” right to remain a global banking center if Britain were to leave the European Union, Bank of England Deputy Governor Andrew Bailey said on Monday.

Some 250 foreign banks employing thousands of people are based in London, making it one of the world’s major financial centers and a rival to New York.

Bailey told the Reuters Regulation Summit this could change if Britain voted to come out of the EU in a June 23 vote.

“We need a banking system to support the domestic economy but I am afraid we don’t have a God-given right to have anything in terms of international. That decision will be taken by many actors over time,” Bailey said.

The EU provides rules for banks, insurers and asset managers that provide a “passport” for them to operate freely across the bloc’s single market. This includes banks from outside Europe, such as the United States and Asia.

“What matters to them a lot is having the passport. If you are a non-EU firm operating in London, then having the passport is important,” Bailey said.

Over the longer term, international banks always have “optionality” on where they do their business, he said referring to their ability to move operations elsewhere.

Backers of Brexit say the City of London financial sector would still be able to thrive outside the EU.

But politicians, policymakers and business leaders who want Britain to stay in the EU have warned of the numerous economic risks of leaving, including potential damage to the City of London financial center.

BoE Governor Mark Carney has come under attack from Brexit supporters, who have accused him of overstepping the mark in his warnings about the impact of leaving the bloc.

Bailey, who also heads the BoE’s Prudential Regulation Authority, said it was the Bank’s job to highlight the risks.

“We would be failing in our job if we didn’t,” he said.

Contingency Plans

Bailey said he was having “daily” conversations with Britain’s banks on how they would cope with the immediate fallout from a Brexit.

Analysts expect a lot of volatility across financial markets, including the potential for sterling to lose up to a fifth of its value.

“All the banks are looking at this very actively,” said Bailey, who will take up a new job as chief executive of the Financial Conduct Authority in July.

The Bank of England is paying special attention to the banks’ funding needs to ensure money keeps flowing to the economy and to avoid a repeat of the damaging credit crunch seen in the 2007-09 financial crisis.

“We have not seen any evidence of sterling funding issues at all. Generally the challenge for banks these days is to get a return on funding rather than finding funding,” Bailey said.

The BoE has already said it would open its taps around the time of the referendum to reassure markets that there is no issue with liquidity.

“We are open for business for banks that want to take up those operations.”

Bailey said foreign currency funding needs also remained sizeable in Britain and were an Achilles heel for some banks during the financial crisis.

Banks do not rely on foreign currency funding as they did during the crisis, but if needed the Bank could source foreign currency liquidity from other central banks.

“We have been quite clear what contingencies we have in place. Clearly, our arrangements with other central banks,” Bailey said.

“We are not complacent, but it is a different starting point from the one we had in the past.”

He believes that Britain’s banks are far more resilient to major shocks than during the crisis and could continue to provide money to the economy even under quite severe stress.

“We do start in a different place in terms of resilience of balance sheets,” Bailey said, referring to discussions with banks about contingency plans for a potential Brexit.

“There are a lot of conversations, but they are not the sort of conversations we were having in the height of the crisis which was ‘how are we going to get through this’,” Bailey said.

He checks on banks’ funding each week and this could be done daily if need be.

Topics Europe London