The Bank of England is reportedly set to unveil plans to allow European banks in Britain to continue to operate as normal after Brexit.

According to the BBC, EU lenders operating in Britain will not have to create subsidiaries based in the UK to carry on with their business even if London and Brussels fail to reach a trade agreement.

Europe-based banks operate in Britain through a network of branches, which offer an easy way to move money around a lender's international business, although they can also leave British customers exposed.

For example, in the event of a financial crisis, an EU lender would swiftly redirect funds to the country in which it is based, consequently leaving UK-based customers out of pocket.

European banks do not have to set up subsidiaries in other member states, thanks to the so-called passporting rights.

The European banking passport system allows banks and other financial institutions authorised to operate in an EU country, or a member state of the European Economic Area (EEA), to conduct business across the union.

However, British banks and financial services firms would lose passporting rights once the UK leaves the single market and it had been mooted that EU lenders based in the UK might have to set up subsidiaries to continue operating.

"There is no place [for financial services]," the EU's chief Brexit negotiator, Michel Barnier, said on Tuesday (19 December).

"There is not a single trade agreement that is open to financial services. It doesn't exist. In leaving the single market, they lose the financial services passport."

Unlike branches, subsidiaries are required to hold their own shock-absorbing capital, which cannot be repatriated in the event of a financial crisis, offering an added layer of protection to their customers.

However, the process of setting up subsidiaries is extremely costly. Earlier this year, Deutsche Bank, which employs approximately 9,000 people in Britain, estimated it could face costs amounting to billions of dollars to create a UK-based subsidiary.

There were fears that forcing EU banks to go through such an expensive process would put them off operating in Britain after March 2019, which could lead to London losing its crown as Europe's financial centre.

"Encouraging EU banks to continue to operate in the UK will help preserve financial stability for the UK and the EU and will help defend London's position as an open global financial centre," said Miles Celic, head of the lobbying group TheCityUK.

According to the report, the decision to allow banks to continue to operate in Britain as normal has been taken to preserve jobs in the financial centre and to protect the taxes European banks pay in Britain.

More importantly, however, allowing EU banks to keep their branches open will boost UK exports, as the services sold by the UK branch of a European bank to a third party count as UK exports.