London could lose its role as "the gateway to Europe" for the financial services sector, one of Germany's most senior banking executives has warned.
Andreas Dombret, the executive board member for the Bundesbank, Germany's central bank, said the days of banks using London as the main banking hub in Europe were numbered and that even if banking rules were "equivalent" between the UK and the EU, the arrangement would be "miles away from access to the Single Market".
"The current model of using London as a gateway to Europe is likely to end," Dombret said at a private meeting of German businesses and banks in Frankfurt earlier this week.
With Britain set to trigger Article 50 of the EU constitution in March, which would effectively rubber stamp its intention to leave the bloc – the pressing concern for worldwide banks is to ensure they retain access to the European banking passport system.
This allows banks and other financial institutions authorised to operate in an EU country, or a state member of the European Economic Area (EEA), to conduct business across the union.
Some banks hope that even once Britain leaves the EU and the Single Market, the UK can agree to an equivalence regime with the block, but Dombret was very cautious about the idea.
"I am very sceptical about whether equivalence decisions offer a sound footing for banks' long-term location decisions," he said.
"Equivalence is miles away from Single Market access. Equivalence decisions are reversible, so banks would be forced to adjust to a new environment in the event that supervisory frameworks are no longer deemed equivalent.
"These lead to the overall conclusion that equivalence decisions are no ideal substitute for passporting [which allows banks in one EU country to operate in another as part of the single market]."
In December, some of the world's biggest banks, with operations in Britain, urged the UK government to allow the banking sector to remain subject to European Union laws for five years after Brexit.
Dombret echoed the sentiment, explaining a transitional period would allow banks the time needed to come to grips with the seismic changes brought about by Brexit and would also minimise what he described as the "earnings risk".
"I expect London to remain an important financial centre," he said.
"Nevertheless, I also expect many UK-based market participants to move at least some business units to the EU in order to hedge against all possible outcomes of the negotiations."