Now that the UK has left the EU many UK nationals living in the EU face problems retaining their UK bank accounts and have difficulties and higher transactions costs making and receiving sterling payments. Here Monito explain the causes and potential solutions.
Economically, Brexit means that the UK has left the single market and the European Economic Area (EEA) and has thus lost all related privileges. One of the most important consequences of Brexit for consumers is that British banks can no longer rely on the EU’s Financial Passporting System, allowing European financial institutions to operate freely within the EEA. Now, in order to offer financial services to UK citizens and Europeans throughout the continent without any friction, they must instead be licensed in each country in which they wish to operate — which might imply opening a subsidiary there, instead of opening a simple branch or providing their services from a third country.
What does this mean for UK nationals living in Europe? Well, depending on which bank they use, they might have trouble opening a new account, making or receiving payments, or even see their existing accounts closed. UK-based consumers might also be affected by the change, for example, through higher fees on cross-border transactions.
Bank Account Closures
One of the most common problems stemming from the end of the Brexit transition period has been the closures of UK bank accounts held by UK citizens living in the EEA. Some smaller boutique private banks, like Coutts, have completely cut off expats based in the EU, while high-street retail banks like Lloyds or Barclays have closed accounts for Britons living in specific countries – the Netherlands, Italy, Spain, Belgium or France have all seen account closures, for example. Other banks, like Santander, won’t close existing accounts for UK citizens based in Europe, but won’t open new accounts for such customers.
If your bank has decided to close your account, you will be (or will have been) notified well in advance, in order to make the necessary arrangements. You might be able to keep your account if you do live in the UK at least part of the year – which will mean providing a UK address to your bank, or if you or your spouse are Crown employees – for example working for the British Armed Forces or the Civil Service abroad. But if your UK account is set to close, don’t worry: you still have several options to consider when it comes to opening a new account to use in the EEA.
- Not all UK banks are closing their door to expats based in Europe. HSBC, for example, which has the advantage of a large presence outside the UK, has stated that they will still be able to consider applications from UK citizens who move to a European country like they did before Brexit. If having an account with a UK-based bank is important to you, for example, if you make and receive a lot of payments in the British pound, this might be a good solution, but you might face some troubles when making payments or receiving money in Europe.
- On the other hand, if you are paid in the EEA and if you do not have a lot of assets in the UK, it might make more sense to open a local bank account in your country of residence. Any resident in an EU country is entitled to open at least a basic account with any bank, though in general UK citizens will likely be able to open a regular bank account without too much trouble. Though this option will make your life easier in Europe, you might end up paying more in fees when it comes to making payments or using your card in the UK, so do check your chosen bank’s international fees before opening your account!
- If you want the most flexibility, an online bank or an electronic money account might be a better option, as they often support multiple currencies very easily, and let you exchange your money at a preferential rate when you decide to.
Note that not all online banks are created equal: Monzo or Starling, for example, are unavailable without a UK address and phone number — though you do not need to be a tax resident there. N26 will not let you have a balance in GBP and nor will Monese if you live in the EU. This is especially important to take into account if you want a bank account in GBP — for example, if you get paid in pounds and don’t want that income to be automatically exchanged into a local bank account.
- Revolut is a good choice, as it lets you keep multiple currencies with the same account, though they do limit the amounts you can exchange for free if you do not have one of their more expensive subscriptions. The main change with Brexit is that they are moving EU-based customers to their Lithuanian entity, and their money will be kept within the EEA. Another option is a Transferwise Borderless account, which can, however, end up being more expensive when it comes to transfers to regular bank accounts. Do note, however, that Transferwise Borderless accounts, as well as most Revolut accounts, are not secured by a traditional banking protection plan, though the money you keep with them is safeguarded.
Higher Fees on Transfers
Britain remains a member of SEPA, the Single Euro Payment Area, a network that allows banks to transfer money within Europe easily, quickly, and, until Brexit, cheaply. The problem stems from the fact that it wasn’t actually SEPA that made intra-EEA payments cheap, but rather European regulations that limited the costs of such transfers between members of the EU and the EEA. With the UK having left both, these regulations no longer apply, and European banks are free to charge higher fees for incoming and outgoing transfers from and to the UK.
In order to avoid such fees and whether you are based in the EU or the UK, it might be a good idea to carefully read the terms and conditions of your bank account. In order to avoid paying too much for your outgoing transfers, the best solution is simply to use Monito’s comparison engine to make sure you’re getting the most bang for your buck:
If your EU bank charges you high fees on incoming transfers, however, you might be better off opening a new account with an institution that charges lower or no fees, especially if you get paid or receive a pension from the UK. Here, a bank like HSBC or an electronic money account like Transferwise Borderless might come in handy.
Another EU regulation that doesn’t apply to the UK anymore is the interchange fee cap, which limits the fee that payment card networks could levy over currency exchanges within the EEA to 0.3% for credit cards and 0.2% for debit cards. As a result, Mastercard has announced that starting in October 2021, it plans to increase its exchange fee for online purchases from EEA-based businesses made with UK credit and debit cards to 1.5% and 1.15%, respectively, an increase of more than 400%!
While these costs are not always passed on to the consumers by the actual providers of the cards, like banks and credit card companies, it might be worth keeping an eye out for any fee increases later in the year. Whether you are based in the UK or the EU, if you make a lot of online purchases in euros from European retailers with a UK card, you might want to consider opening an account with a bank or credit card company that charges less for foreign currency transactions.
Finally, a problem that might affect euro account holders, both UK and EU citizens alike, is that of IBAN discrimination. What does IBAN mean? Much like SEPA, the acronym is pretty simple: it stands for International Bank Account Number – sometimes, you’ll see it called an IBAN number, which is a bit of a pleonasm. IBANs are essentially standardised bank accounts that allow for easier international transactions. They can contain up to thirty-four characters, either digits or letters, and one of their main features is the prominent country code at the beginning of each number. It allows GB98 MIDL 0700 9312 3456 78 to be immediately identified as a British IBAN, while FR76 3000 6000 0112 3456 7890 189 clearly belongs to a French account.
In some countries, like Switzerland or Turkey, this allows merchants or companies to limit their financial interactions with foreign bank accounts by refusing to transfer or receive money via direct debit to and from foreign IBAN. But when it comes to euro accounts within the SEPA, this is not allowed: your French electricity provider cannot refuse your direct debit request because your euro account’s IBAN starts with GB, and your Irish employer is not allowed to refuse to pay your salary to a Lithuanian IBAN.
If you are a victim of IBAN discrimination by an EEA company, you might want to remind them that it is illegal under Regulation No. 260/2012, report them to your bank, and, if everything else fails, you can also make a formal complaint to the relevant compliance authorities. At the moment, IBAN discrimination tends to be prominent with accounts opened through neobanks, who often issue IBANs from a single EU country – or for UK based banks… from the UK. Revolut, Monese, Transferwise, N26 and Starling Bank have all published guides for their customers who are affected by the issue, including standard complaint letters or report forms.
See the original article from Monito