BOE Steps in as “Risks Have Begun to Crystalize”
Mark Carney, Bank of England (BOE) Governor, delivered remarks this morning in conjunction with the release of the Semi-Annual Financial Stability Report. Carney outlined plans to relax capital standards for United Kingdom (UK) banks. The BOE’s Financial Policy Committee (FPC) had predicted the referendum would present the “most significant” risks to “financial stability,” and confirmed in the report that “those risks have begun to crystallize.”
As Britain’s financial sector enters a “tougher economic outlook,” the BOE decided to cut capital requirements and reduce the countercyclical buffer. Carney said the central bank would freeze the cuts for at least a year. He cautioned that the Prudential Regulation Authority (PRA) would ensure these measures were used exclusively to support domestic banking activities and “no bank increases to dividends.” Carney also introduced the possibility of interest rate cuts, which will likely be confirmed next week. Despite the unrest, the UK remains committed to existing regulatory priorities. Carney said that BOE was working steadily to develop ring-fenced banks and said, “nothing in financial regulation will change until the process of the UK’s withdrawal from the European Union (EU) is complete.”
£1 GBP = $1.31 USD
€1 EUR = $1.12 USD
(as of 9:000 AM EST, 7/5/2016)
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