Do you work for an "orphan bank" without a Brexit strategy?

A new phrase has crept into the banks-and-Brexit vernacular: "orphan banks." While most banks in London have already arranged an assortment of banking licenses in the European Union, orphan banks haven't. They are the banks which need either to hope that full passporting persists indefinitely, or to embark upon the cumbersome process of registering a new office on the European mainland as soon as possible.

"Every single bank is in the process of looking at what it has on the ground in the EU already," says one consultant working with banks on Brexit-mitigation strategies. "Most banks are putting together three month, six month, and nine month plans. If activities need to be migrated from London, there's a tendency to favour moving them to these already established offices. That's a problem for orphan banks which have just been operating out of the UK."

Which are these orphans? The consultant points a finger at smaller U.S. firms as well as Japanese banks, Chinese banks and Canadians.

Nomura in particular is thought to be exposed to the consequences of a so-called "hard Brexit". The Japanese bank has yet to make a profit at its international investment banking operations and would likely be thwarted in its attempts to turn a profit next year if it became necessary to create a fully functioning EU subsidiary. However, Nomura isn't one of the orphans: the Japanese bank is already registered in Paris. Nor are Mizuho and Mitsubishi UFJ, which are registered in Holland. Nor are Wells Fargo and Royal Bank of Canada (RBC), which are registered in Ireland. Meanwhile, China Construction Bank and Bank of China are already in Luxembourg.

Instead, the EU orphans who've been reliant on passporting out of the UK to operate in mainland Europe are a motley group from anywhere and everywhere. For example, we could find no EU registered entities for Jefferies, TD Securities, Daiwa, and Macquarie, nor for Singaporean OCBC Securities or Chinese banks like Haitong and China Merchant Securities. These are the banks which need to come up with a Brexit strategy, and soon. Relying upon continued passporting or the "EEA Norway option" looks a little complacent.