The head of Germany's financial regulator has warned that City firms are nearing the "point of no return", as he urged banks wanting to leave London to speed up their applications ahead of a possible "cliff-edge" Brexit.
Bafin president Felix Hufeld suggested that time may be running out for UK and EU negotiators to strike a mutual recognition deal that would effectively allow financial services to continue serving customers in each others' markets.
"Have we already hit a point of no return? I don't think so. But we're getting closer," he said at an event organised by consultancy zeb in London.
A number of global banks and insurers are preparing to relocate business and staff from London to the continent in order to secure their EU operations, and Mr Hufeld said many will not wait much longer to get those plans in motion.
"Some of the large clearing member banks obviously can't wait until February 2019 to start relocating," he said.
The likely "point of no return" will be in "somewhere around early next year, and I'm not sure whether it's January, February, March or April, but it's somewhere in that quarter," Mr Hufeld added.
Bafin is currently preparing for the worst case scenario following Britain's EU divorce, given the lack of progress from the last five rounds of Brexit talks.
"Negotiators have not made sufficient progress on the designated key separation issues. For the time being, we therefore have to assume that the UK will not be a member of the common market or anything close to it following Brexit.
"There are only 18 months to go before that happens, possibly leading to a so-called cliff-edge situation," the regulator's president said.
Bafin has already conducted several workshops with "a number" of firms, and while it will offer assistance to "all institutions" that are interested in relocating their business to Germany, Mr Hufeld warned that resources could be tested.
"We only have limited resources, too, of course. So, as the saying goes, it's first come, first served."
Speaking to media, Mr Hufeld said Bafin is looking at allocating further funds and staff towards Brexit-related work as it starts preparing its 2018 budget.
While reports have emerged that Germany could attract as many as 40 UK-based banks to Frankfurt, Mr Hufeld said the number was "too high".
"Twenty-ish is a more realistic number than 40-ish, that's for sure."
Only one "very small insurance company," has so far applied to go to Munich, he said. "Everything else goes to Frankfurt."
Lobby group Frankfurt Main Finance recently estimated that the influx of financial services staff over the next four years could result in the creation of up to 87,667 new roles throughout the Rhein-Main Region, but Mr Hufeld said job creation as a result of relocation is not his concern.
However, he noted that Brexit will come at a "price" for both the UK and the EU.
"Cost of doing business will go up, certain costs for consumer may go up. I've said before it's difficult to predict... but the assumption that it's going to be a cost-free incident, I find completely unrealistic."
He added: "Nobody knows what is happening in 10 years or 15 years... (but) it does show that the degree of interaction and benefits of being in the EU have been underestimated by many people.
"We all will pay a price for that, that's for sure."