Risks related to Brexit, has already begun to emerge, said the head of the Bank of England mark Carney. Against this background, the Central Bank forecasts, in the financial system, and volatility in the markets and in the economy.
After the referendum on the British exit from the EU will be followed by a period of uncertainty during which the country will have to adapt to a new environment, the country will need time to establish new relations with the European Union and the rest of the world, it is noted in the progress report of the Bank of England on the situation of the financial system, published twice a year. “Against this background, it is expected some volatility in the markets and the economy”, — the document says. In these circumstances, the controller predicts the complexity in the financial system of the country.
“The number of vulnerable households may increase due to the difficult economic forecast”, — said the head of the Bank of England mark Carney during today’s press briefing on the release of the report. While Carney has announced measures that the regulator is ready to take to stabilize the situation.
In particular, the Central Bank plans to reconsider its March decision to increase requirements on capital adequacy of banks. The decrease in this standard for £5.7 billion will allow UK financial institutions to free up £150 billion ($197 billion), which can be focused on lending to companies and households. In addition, the regulator reduced the requirements for insurance companies in the adaptation to new EU rules adopted in the beginning of the year to prevent the sale of corporate bonds and to reduce the burden on business.
The report identifies five key risks, which will closely watch the Central Bank to ensure smooth functioning of the financial system, markets and the availability of credit: decrease in investment appeal of British assets; changes in the budget expenditure, which could worsen credit conditions for business; increase in the number of vulnerable households and the Pro-cyclical behavior of investors who buy property to rent; the forecast of the world economy; the reduction of liquidity in the global financial markets. According to the regulator, the deterioration of investment appeal of the British asset can strengthen the downward pressure on the exchange rate. The commercial real estate sector is especially vulnerable to the changing preferences of investors, the report noted.