FRANKFURT, Germany (AP) — A top European financial supervisor warned Wednesday that banks both in Britain and the European Union need to be ready for a so-called hard Brexit, in which the U.K. leaves the bloc without a transitional period to ease the changeover.

Under a hard Brexit, Britain would exit the 28-country EU and its free-trade zone completely when the deadline arrives in March 2019. That means banks headquartered in London would lose their automatic right to do business throughout the rest of the bloc. A transition period could provide time for banks to adjust to new rules of trade.

“We cannot be sure whether the transitional period will really happen,” said Sabine Lautenschlaeger, the vice chair of the European Central Bank’s banking supervisory board. “Banks must continue to prepare for any outcome, including a hard Brexit.”

Prime Minister Theresa May’s government is preparing to negotiate new terms of trade with EU officials and it remains unclear whether the parties will agree on transitional arrangements or make an abrupt break.

Lautenschlaeger said at a news conference in Frankfurt, Germany, that banks that want to relocate from London to the 19 EU countries that use the euro currency should have submitted their license application already. She said eight banks have already applied and four others have indicated they plan to substantially increase their activities in the 19-country currency union. Britain has been a member of the EU but not of the euro.

She said that depending on how Brexit negotiations go, banks might get more time to relocate — but only those that have already presented “credible plans” to do so.

She said eurozone banks that want to do business in Britain also need to get ready for Brexit by submitting license applications to the British supervisor, the Prudential Regulatory Authority.

Lautenschlaeger warned banks that want to move that they cannot simply set up a shell company in the eurozone. “Banks must be real banks if they want to operate in the euro area,” she said.