BoE flags post-Brexit risks

The outlook for Britain’s financial system stability is challenging, the Bank of England has warned.

BoE officials didn’t announce any new policies this month. Picture: AFP

The Bank of England said on Thursday that the outlook for the stability of the financial system in the UK is challenging, citing concerns stemming from June’s vote to leave the European Union as well as volatile financial markets.

The BOE’s Financial Policy Committee said in a statement following its quarterly meeting September 20 that the UK “faces a challenging period of uncertainty and adjustment” following June’s referendum. The UK voted to leave the EU, a decision that has stoked uncertainty about the nation’s future economic ties to its largest trading partner.

The FPC, which monitors financial stability risks, highlighted two specific risks relating to the result. One is a sharp fall in prices and transactions in the commercial real-estate market, which could hurt lenders, and the second is the risk that foreign investors turn sour on the UK, undermining the nation’s ability to easily finance the gap between what the nation spends at home and earns from abroad.

“The FPC judges that the current outlook for financial stability in the United Kingdom remains challenging,” the panel said.

Officials didn’t announce any new policies this month. Following the referendum in June, they trimmed capital requirements for banks to allow more lending to households and businesses. The panel’s interest-rate setting counterpart, the Monetary Policy Committee, in August cut its benchmark rate to a new low as part of a package of measures to cushion the economy.

The FPC also flagged risks to the UK financial system from abroad. It cited economic and political uncertainty across the globe and struggling banks in parts of Europe. Officials also said they’re concerned about high prices and volatility in bond markets.

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