Portfolio

Bank of England says EU regulators not ready for no-deal Brexit

By Abigail Townsend

Date: Tuesday 05 Mar 2019

Bank of England says EU regulators not ready for no-deal Brexit

(Sharecast News) - The Bank of England believes the UK's financial system can withstand a no-deal Brexit, but that banks and firms in Europe are less-well prepared - which in turn could hurt Britain.
In an update from the Financial Policy Committee on Tuesday, the Bank said that most of the risks to UK financial stability, which could arise from disruption to cross-border services in the event of a no-deal Brexit, have been "mitigated".

But it also warned that European Union regulators had not done enough to protect EU institutions from no-deal shocks.

It said: "However, some disruption to cross-border services is possible and, in the absence of other actions by EU authorities, some potential risk to financial stability remain.

"Although these would primarily affect EU households and businesses, they could also be expected to spill back to the UK in ways that cannot be fully anticipate or mitigated."

A number of UK and global banks are transferring activities to EU-incorporated entities ahead of Brexit. But the Bank warned that they "are not yet in positions to provide the full range of wholesale banking services to EU clients". Potential issues could include higher interest rates for borrowers in the EU, the bank said.

The update came as the Bank announced it had activated a currency swap line with the European Central Bank, which will ensure UK-based banks can continuing borrowing in the single currency in the wake of a no-deal Brexit. The weekly auction of euros will start from next week.

The BoE also confirmed that it will launch a pilot cyber stress tests for major UK banks in mid-2019 but will not publish individual results.

Next year's stress tests will include CYBG as well as the standalone ring-fenced arms of the main lenders.



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