Prisma by Dukas | Universal Images Group | Getty Images British banks hold enough capital to cope with a simultaneous disorderly no-deal Brexit and global trade war, the Bank of England said on Thursday as part of its half-yearly assessment of financial risks. In an assessment that raised little in the way of new concerns, the BOE confirmed it would intensify its focus on risks such as illiquid investment funds, liquidity shocks, crypto-currencies and environmental dangers. «The perceived likelihood of a no-deal Brexit has increased since the start of the year,» the BOE’s Financial Policy Committee said. «The UK banking system remains strong enough to continue to lend through the wide range of UK economic and financial shocks that could be associated with Brexit,» it added.
Since the BOE’s last Financial Stability Report in 2018, Brexit has been delayed from March 29 to Oct. «Financial stability is not the same as market stability. Significant volatility and asset price changes are to be expected in a disorderly Brexit,» the BOE said on Thursday. This follows the suspension in June of a fund from Neil Woodford, one of Britain’s best known money managers, after it was unable to meet demands from clients wanting to pull out their money.
The suspension was renewed indefinitely this month. The BOE said its concerns centred on funds that focused on illiquid assets such as commercial property and some corporate or emerging market bonds, rather than company shares that are easily traded. The aim of the exercise was to look at ways to mitigate the spillover to other parts of the economy. British-based banks already hold 1 trillion pounds in liquid assets to cope with a disorderly Brexit or other shocks.
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