United Kingdom financial system resilient to disorderly Brexit: BoE

Galtero Lara
Julio 12, 2019

Further, the twice-yearly report said most risks to financial stability from disruption to cross-border financial services in a no-deal Brexit have been mitigated.

Other names in the mix include Bank of France governor Francois Villeroy de Galhau, EU finance commissioner Pierre Moscovici of France, and former British finance minister George Osborne.

"Even if a protectionist-driven global slowdown were to spill over to the UK at the same time as a worst-case disorderly Brexit, the core UK banking system would be strong enough to absorb, rather than amplify, the resulting economic shocks and continue to serve UK households and businesses."

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.

The Bank also said they could withstand a simultaneous worldwide trade war, amid heightened tensions between the USA and China.

The central bank's warning comes as the two contenders to succeed Theresa May as prime minister are flirting with the idea of leaving the European Union without agreeing withdrawal terms, an outcome the central bank has warned would likely cause economic disruption.

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The Bank did say, though, that the impact of rising expectations of no-deal was already being seen in "much weaker" levels of investment in markets dependent on foreign investors - for example, commercial property.

However, the report says United Kingdom banks and the United Kingdom economy, in general, are improving in their preparedness in case this happens.

The FPC said it was satisfied that its most recent stress test at the end of 2018 was tougher even than this outcome and that banks would withstand the double-whammy hit.

These comments came via the bank's periodic financial stability report which details the current status of the British financial system as well as its possible future status.

The aftermath of the locking down of Neil Woodford's investment fund has also seen the Bank conduct a review into how prone the economy is to impact through investments from so-called "open-ended" funds, which is now ongoing.

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