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Reuters
LONDON
British banks hold enough capital to cope with a no-deal Brexit and a global trade war simultaneously, the Bank of England said on Thursday, although a disruptive Brexit would still cause major turbulence for financial markets and the economy.
Bank of England Governor Mark Carney also flagged ongoing concerns about illiquid investment funds, liquidity shocks, crypto-currencies and environmental dangers at a half-yearly update on the risks facing Britain’s banking system.
Carney said while banks were well prepared for Brexit, this did not mean the economy would be unscathed if Britain left the European Union on October 31 without a transition deal, something both contenders to be the next prime minister say is possible.
“Financial stability is not the same as market stability,” Carney told a news conference.
“In a disorderly Brexit, a range of UK asset prices would be expected to adjust sharply, tightening financial conditions for UK households and businesses.”
The BoE noted a sharp fall in foreign investors buying British commercial property and some company loans.
“There has been a deterioration in the quality of inflows ... that are financing the current account deficit,” Carney said, adding that it was crucial Britain remained an attractive investment destination after Brexit.
The BoE said trade tensions between the United States and China had increased global financial risks and there was a rising number of heavily indebted companies in the United States, continental Europe and elsewhere.
British banks were better prepared for a downturn than they were before the 2008 financial crisis when they held much less capital and required multi-billion-pound bailouts.
“The system would continue to serve UK households and businesses even if worst-case disorderly Brexit occurred at the same time as a global slowdown triggered by a trade war,” Carney said.
LONDON
British banks hold enough capital to cope with a no-deal Brexit and a global trade war simultaneously, the Bank of England said on Thursday, although a disruptive Brexit would still cause major turbulence for financial markets and the economy.
Bank of England Governor Mark Carney also flagged ongoing concerns about illiquid investment funds, liquidity shocks, crypto-currencies and environmental dangers at a half-yearly update on the risks facing Britain’s banking system.
Carney said while banks were well prepared for Brexit, this did not mean the economy would be unscathed if Britain left the European Union on October 31 without a transition deal, something both contenders to be the next prime minister say is possible.
“Financial stability is not the same as market stability,” Carney told a news conference.
“In a disorderly Brexit, a range of UK asset prices would be expected to adjust sharply, tightening financial conditions for UK households and businesses.”
The BoE noted a sharp fall in foreign investors buying British commercial property and some company loans.
“There has been a deterioration in the quality of inflows ... that are financing the current account deficit,” Carney said, adding that it was crucial Britain remained an attractive investment destination after Brexit.
The BoE said trade tensions between the United States and China had increased global financial risks and there was a rising number of heavily indebted companies in the United States, continental Europe and elsewhere.
British banks were better prepared for a downturn than they were before the 2008 financial crisis when they held much less capital and required multi-billion-pound bailouts.
“The system would continue to serve UK households and businesses even if worst-case disorderly Brexit occurred at the same time as a global slowdown triggered by a trade war,” Carney said.
