UK Banks Resilient To Disorderly Brexit: BoE

Marco Green
July 12, 2019

Patel said: "It is also notable that where the November stability report points to broad resilience across the banking sector, it is now speaking only about major banking institutions".

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

The perceived likelihood of a no-deal Brexit has increased since the start of 2019.

He said while the government had made progress in preparing for a no-deal, it still had work to do, while there was also significant action needed on the part of European Union authorities.

The Bank of England has sounded the alarm over the risks to City banks from no-deal Brexit, warning that companies across Europe could be cut off from their lenders overnight.

Britain should do what it can to remain attractive to the worldwide investors who fund its large current account deficit, potentially one of the economy's major vulnerabilities, Bank of England Governor Mark Carney said on Thursday.

The report added: "Even if a protectionist-driven global slowdown were to spill over to the United Kingdom at the same time as a worst-case disorderly Brexit, the FPC judges that the core United Kingdom banking system would be strong enough to absorb, rather than amplify, the resulting economic shocks". "Overall, the stress scenario was more severe than the global financial crisis".

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.

The FPC said it would team up with a fellow regulator, Britain's Financial Conduct Authority, to assess whether investment funds should be required to set lengthier withdrawal periods for investors if they hold hard-to-sell assets such as commercial property.

For leveraged loans, loans to riskier corporate borrowers, inflows were 17% of the 2018 average, according to the central bank. Commercial real estate prices are also continuing to fall.

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. 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.

Other reports by Click Lancashire

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