Cyprus Mail 12 December 202- - by Andrew Rosenbaum
The Bank of England (BoE) is unable to prevent potentially considerable disruption to financial services caused by the failure to reach a Brexit agreement, governor Andrew Bailey has warned.
In his opening remarks to the BoE’s Financial Stability Report, published on Friday, Bailey said that while “most risks to financial stability that could arise from disruption to cross-border financial services have been mitigated,” unavoidable risks remain.
Bailey noted that most financial services companies in both the UK and the EU have made extensive preparations for the Brexit transition, and consequently many risks have already been addressed.
However, the report warned, “some market volatility and disruption to financial services, particularly to EU-based clients, could arise.”
Bailey said: “As we have said many times, financial stability is not the same as market stability and does not mean we can avoid disruption to financial services in all parts of the landscape. We cannot prevent disruption for EU clients caused by measures taken elsewhere, regrettable though that is.”
“Market volatility could be reinforced in the event that some derivative users are not fully ready to trade with EU counterparties or on EU or EU-recognised trading venues. Financial institutions should continue taking measures to minimise disruption,” the report warned.
“Irrespective of the particular form of the UK’s future relationship with the EU, and consistent with its statutory responsibilities, the FPC remains committed to the implementation of robust prudential standards in the UK. This will require maintaining a level of resilience that is at least as great as that currently planned, which itself exceeds that required by international baseline standards, as well as maintaining UK authorities’ ability to manage UK financial stability risks,” the report continued.
It is up to individual financial institutions to take measures to control risks and reduce disruption, Bailey added.
If no deal is secured, the UK’s position as a ‘third-country’ to the EU raises major concerns about the capacity for cross-border financial services between the UK and the 27 Member States.
The Financial Stability Report stated that “the UK banking system remains resilient to a wide range of possible economic outcomes. It has the capacity to continue to support businesses and households even if economic outcomes are considerably worse than currently expected. This reflects the build-up of substantial buffers of capital since the global financial crisis.”
