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Banks hold ‘daily conversations’ over Brexit chaos plans

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The Bank of England is having daily talks with banks in a bid to protect the financial system in the event the UK votes to leave the EU.

Deputy governor Andrew Bailey, soon to be FCA chief executive, told a regulation conference all lenders were preparing contingency plans, according to The Times.

Bailey said: “All the banks are looking at this very actively.”

He added: “We have not seen any evidence of sterling funding issues at all. Generally the challenge for banks these days is to get a return on funding rather than finding funding.”

Yesterday, ratings agency Fitch warned the pound could drop in value by a third on a leave vote. In addition, house prices could slump by a quarter, putting intense pressure on lenders’ balance sheets, it said.

Bailey also defended the central bank’s decision to comment publically about Brexit, saying “we would be failing in our job if we didn’t”.

He added the City had “no god-given right” to remain a global banking centre and that its standing would be under threat if the UK exited the EU.

Last month governor Mark Carney said a Brexit vote was “the most significant near-term domestic risks to financial stability”.

The Bank has already announced plans for three repo auctions to be held around the 23 June vote in a bid to boost cash reserves.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Fitch (who presumably have no particular vested interest) recon that Sterling will drop by 30% by the end of the year following Brexit – in all modesty just as I said months ago. Not that I can compare myself, but I do recall George Soros.

    They also forecast a 25|% drop in house prices. That indeed could be a good thing. However, as with all the others this is perhaps speculation once again. But no smoke without fire?

    No doubt the economically expert and infallibly prescient Brexiters will say all this is nonsense and we will all prosper from Monday 27th June onwards.

    • James Hurdman 17th May 2016 at 1:20 pm

      I am pro-exit, but I wouldn’t for one moment think that there will not be financial repercussions (for the better or worse). Maybe that’s the price/value of democracy?

  2. Isn’t there an irony that the banks are worried about the chaos that may ensue if we leave the EU but we are still wading through the turmoil of the issues they caused nearly a decade ago

  3. Yes and all the ‘experts’ and ‘people in the know’ said that we had to join the € or else the City would sink into the sea on the rise of Frankfurt and Paris. One day the ‘doom and gloom’ mongers will actually be proven correct because past performance is no guarantee that they will always be wrong. In all honesty nobody KNOWS what will happen, if we stay or if we leave so all these ‘expert’ opinions are only best guess scenarios.
    More seriously we are being asked to vote for more integration with Europe, because David Cameron failed to get anywhere with his negotiations, or to come out and take control of our own affairs.
    Incidentally trade will not cease were we to withdraw from the EU. We and the rest of Europe will continue to trade with each other and all the major and minor trading areas around the world. We never needed a bureaucratic United States of Europe, just a common market such as the one we were told we were joining 40+ years ago.

  4. Ah, Fitch Ratings – bless them. The agency that got it so right over Lehman Brothers and mortgage-related securities and was accused of bias in favour of the USA, having downgraded European economies and been on the receiving end of accusations that it exacerbated the financial crisis – I, too, would be modest, about revelling in their forecasts.
    I recall George Soros as well – although not a particularly likeable man, he did recognise the folly of artificial constructs using fixed exchange rates to fight natural market forces.
    On the contrary, it appears that those in the Remain camp prefer to adopt the mantle of being “infallibly prescient” – to the point of sneering at “Little Englanders” who dare question their great project. On that point, before rolling out that phrase again, it`s worth taking a look at:
    http://capx.co/what-the-term-little-englander-might-say-about-those-who-use-it/

  5. Fitch are by no means alone. Goldman Sachs said the same thing months ago. There is money to be made shorting Sterling and Brexit will present a golden opportunity to do so. When you have the Gov of the BoE and MD of the IMF and goodness knows who else all warning dire financial consequences – sure they may not be right, but collectively will they all be wrong? It would be foolish not to take note. Admittedly both sides of the debate are being foolish, but Brexiters are now starting to appear the more foolish.

    • David Quarrell 18th May 2016 at 5:08 pm

      As has already been said there will be financial consequences of a Brexit, however I did not sign up to a federal Europe where British law and rules are over-ridden by unelected commissioners, and where we will continue on the slippery slope to a federal republic of Europe paid for in the main by Germany and the UK. Sometimes a stand has to be made and a price paid. If we vote remain, it will be seen as a green light for greater integration AND with Turkey in the EU.

  6. It`s curious that transnational organisations whose revenue streams rely on the status quo being maintained are unanimous in decrying the notion of a Brexit. Cynics might postulate that this may have something to do with their capacity to lobby and influence the EU while being sufficiently well-capitalised to absorb the costs of its additional bureaucracy – despite SMEs accounting for at least 99% of the businesses in every main UK industry sector (a very effective barrier to entry).
    It`s also curious that, once knowledgeable people have left positions of influence (and presumably may speak their mind without the need for a meal ticket – e.g. Lawson, Lamont, Mervyn King, John Longworth, Digby Jones), they magically become unencumbered in their criticism of an unreformable technocracy. Even the MD of Goldman Sachs gave into his conscience a couple of days ago and broke ranks, backing Brexit (I now fear for the size of his redundancy package).
    It is no surprise that institutionalised individuals are loath to rock the boat: as you will be aware the the MD of the IMF just happens to be a long term EU integrationist.

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