Tuesday, 8 March 2016

Carney Warns of Brexit Risk to U.K. Financial Stability

In World Economy News 09/03/2016

Bank of England Gov. Mark Carney on Tuesday said the possible departure of the U.K. from the European Union represents the biggest domestic risk to U.K. financial stability.
Britons will vote on June 23 on whether to stay a member of the 28-nation bloc in a referendum called by Prime Minister David Cameron, who wants the U.K. to remain in the EU.
The risk of departure “is a risk to domestic financial stability and it has some potential to amplify pre-existing risks to financial stability,” Mr. Carney said in testimony to British lawmakers.
In early remarks Tuesday the governor also warned that financial-sector activity would “without question” move away from London if the U.K. voted to leave the EU and lost access to the bloc’s single market.
“One would expect some activity to move,” Mr. Carney told lawmakers, adding that some financial firms are already planning for that possibility.
His comments came after the Bank of England said earlier Tuesday that the U.K.’s new deal with the EU should help it achieve its twin objectives of maintaining low and stable inflation and preserving financial stability.
The Bank said in a letter to parliament’s Treasury Committee, which scrutinizes economic policy, that the deal reached by Mr. Cameron in Brussels late February addresses some of the important issues of EU economic governance the Bank had identified as critical to its objectives.
In particular, the deal makes clear the Bank and other U.K. authorities are responsible for managing Britain’s financial system, according to the letter.
Mr. Cameron’s deal “explicitly recognizes the needs of the U.K. to supervise its financial stability, while not impeding the implementation of necessary, further integration amongst members of the euro area,” Mr. Carney wrote.
Source: Dow Jones