The end of “passporting” after Brexit
“Passporting” is a framework of the European Union that allows banks, investment firms and other financial service companies in any EU or EEA (European Economic Area) to operate freely in any other member state with little red tape/minimal additional authorization. This means that, before 2016, British expats in EU countries could use their UK-based bank accounts as freely as if they were domiciled in the UK itself. They could create and withdraw deposits, take out loans (including mortgages!), and make investments with near-complete freedom.
This freedom was particularly important for retiree expats, who accessed their state pensions – on which they depend to live – via these accounts. Many working expats also preferred to keep some savings in a UK bank account to use whenever they took short trips back home: it avoided them ATM, transfer and currency exchange fees that they'd have incurred if they used a foreign bank account (one of whichever country they worked in) whenever they were temporarily in the UK.
Since the European Union Withdrawal Act was passed in 2020, the British financial institutions have lost their passporting rights and must now apply for a separate license in each EU/EEA country they wish to operate in. They also now have to carry out more time-consuming and costly compliance procedures.
Some banks, including major ones, have calculated that these cons relating to compliance outweigh the pros, especially if they have only a relatively small pool of expat account holders in certain EU/EEA countries. As such, since 2020, they have been informing their customers that they might reduce their overseas services in the future.
In 2021, a major British bank informed 13,000 expats that their accounts would be closed in a few months. In September 2023, another high street bank sent a similar letter/email to nearly all of its British customers who are not domiciled in the UK but have either a current or savings account with them. These expats now have 6 months to either transfer their funds to an account in their country of residence or to open a special account called a "global account" with the same British bank. British expats who have a loan with that bank won't have their product closed down, but they won't be able to apply for another loan or remortgage.
Affected expats now need to transfer their funds or open a global account
What can the affected expats do? After the latest bank's announcement, they have two options: either transfer their funds to a local bank in the country they're residing in (or another UK-based bank that still offers full services to expats… for now), or open a global account with the same bank. Here's the problem, though: a global account needs a minimum deposit of £100,000 (about US$120,000) or needs to pay a monthly fee of £40 (about US$50). This isn't a problem for wealthier expats, but it can be one for middle-class and working-class expats, as well as for retired expats.
On the forum of Expat.com, some affected British expats propose using a relative's UK address for their account as a loophole. However, they warn that it will raise alarm bells if the expat regularly performs bank procedures relating to this account from abroad (e.g: withdrawing from non-UK ATMs, transferring money into it every month from Spain or France). The UK-based bank will then suspect that the customer has lied about their actual domicile. But the expats on the forum also say that if it's an account they rarely use from abroad, such as a savings account or an account they use only when they're in the UK for the holidays, the bank might not notice any anomaly.
Many expats on the forum think that the banks' decision is simply “economic and risk based” rather than a politically-motivated one, but they still believe it will be difficult to fully reverse the financial damage that Brexit is causing to expats within the next 10 years. Some expats say they are confused by this decision by the banks, because the UK doesn't require as stringent of an oversight over overseas financial transactions as, for instance, the FATCA (Foreign Account Tax Compliance Act) requires in the US. Others expats that this is old news, because the bank accounts of some of their expat friends/contacts have already been closed in 2021-2022, so this latest announcement by one bank shouldn't be surprising.
