Carney: UK financial system strong enough for Brexit
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Carney: UK financial system strong enough for Brexit 24 June 2016London Reporter: Stephanie Palmer
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Mark Carney, Governor of the Bank of England, has reacted to the UK vote to leave the European Union, saying that there will be no immediate change “in the way our goods can move or the way our services can be sold”.
The UK, which has been a member of the EU since 1973, will leave the union after 52 percent of voters opted for a ‘Brexit’.
Carney said in a statement that, although “some market and economic volatility can be expected as this process unfolds,” the treasury and the Bank of England have a contingency plan for an exit vote are well prepared to take additional measures as the market adjusts.
Noting that there will be a period of uncertainty and adjustment following the result, he said: “It will take some time for the UK to establish new relationships with Europe and the rest of the world.”
“Some market and economic volatility can be expected as this process unfolds.”
Carney went on to explain that the Bank of England has worked on strengthening the UK financial system.
He said: “The capital requirements of our largest banks are now ten times higher than before the crisis.”
“The Bank of England has stress tested them against scenarios more severe than the country currently faces.”
UK banks have raised £130 billion of capital and have £600 billion of high quality liquid assets, Carney said, meaning they have “the flexibility they need to continue to lend to UK businesses and households, even during challenging times”.
The Bank of England has and additional £250 billion of additional funds to support the markets through its “normal facilities”, and can provide liquidity in foreign currency, Carney said.
These preparations are intended to “support orderly market functioning in the face of any short-term volatility”.
He said: “We expect institutions to draw on this funding if and when appropriate, just as we expect them to draw on their own resources as needed in order to provide credit, to support markets and to supply other financial services to the real economy.”
Carney said: “The bank will continue to consult and cooperate with all relevant domestic and international authorities to ensure that the UK financial system can absorb any stresses and can concentrate on serving the real economy.”
“That economy will adjust to new trading relationships that will be put in place over time.”
He concluded: “In the future we will not hesitate to take any additional measures required to meet our responsibilities as the United Kingdom moves forward.”
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