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Bank of England issues warning on post-Brexit financial stability

Bank of England BoE Bank 480

The Bank of England has called for financial services companies to prepare for Brexit as it launches a new stress test for UK banks.

The Financial Policy Committee said today that an additional stress test with a seven year timeframe will run alongside its annual cyclical stress test.

The test will assess how resilient the UK banking system will be if “recent headwinds to bank profitability persist and intensify”, and will consider weak global growth, persistently low interest rates, falling world trade.

Cross-border banking activity and the increased pressure on large UK banks from smaller banks and non-banks will also be taken into account.

At its meeting on 22 March, the FPC said it is also considering how to counter businesses creating increasingly complex structures post Brexit, which could “reduce the resilience of the UK financial system”.

With Article 50 being triggered on Wednesday, the FPC says there are “a range of possible outcomes”, with risks to financial stability “influenced by the orderliness of the adjustment to the new relationship between the United Kingdom and the European Union”.

The FPC says: “The FPC will assess the financial stability implications of firms’ plans to adapt to the United Kingdom’s withdrawal from the European Union,”

“The FPC supports the work of the Prudential Regulation Authority and FCA to ensure regulated firms have comprehensive plans in place to operate in a range of possible outcomes. Sudden adjustment could disrupt the provision of market liquidity and investment banking services, particularly to the EU real economy, which could spill back to the UK economy through trade and financial linkages.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Why would Brexiteers take any notice of this warning? They have been warned from the very outset. But blind faith rules where sober judgement is heresy.

    • There is an article today in the Telegraph that states the top 5 things we will achieve from brexit are getting back bendy bananas, more powerful vacuums, removal of green energy initiatives and the working time directive and a return to incandescent lightbulbs.

      I’m sure you’ll agree that these are the most important issues facing Britain and the world right now.

  2. The same people issuing the same “End of the World” situation as they said would happen if the referendum vote was to leave? They and other “experts” were wrong then and I think they will be wrong again. Will it all be plain sailing? No of course not. Will there be compromises from UK & EU? Of course there will. Will a deal be struck ? I think Yes as both sides want good outcome for their respective nations. We can then get on with doing deals with as many of the other 172 countries around the world as we want to. It will be a different world post Brexit, but I fully believe it will be for the better from the medium term onwards

    • How can these ‘experts’ be wrong about the effects of leaving when we are yet to actually leave? I would suggest you hold off on your predictions until 2020, when the effects of the vote will actually be known.

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