The banks of the United Kingdom “prepared for the Brexit and the commercial war”
The Bank of England says that the banking system of the United Kingdom remains resistant to the financial impact of a disorderly Brexit in the worst case.
The comment came in his regular health check at the banks, the Financial Stability Report.
The Bank said that “the perceived likelihood that Brexit has not been negotiated has increased since the beginning of the year.”
He said that the “material risks” of the economic interruption of such a scenario remain.
However, there has been “some improvement in the preparation of the UK economy for Brexit without agreement”.
Since last year, UK banks have been forced to retain more capital and demonstrate easy access to £ 1 trillion in funds (liquidity).
The Bank says such a cushion would allow the banking system to continue lending to the economy, even if the United Kingdom were out of international markets for three months.
This stress test in the worst case scenario means that the economy is reduced by 4.7%, unemployment has more than doubled to 9.5% and property prices fall by 33%.
The Bank’s key Financial Policy Committee went further than before by saying that the banking system would also be resistant to a messy Brexit that occurs at the same time as a global trade war that involves 25% tariffs on US-US trade. China, all global inputs and A 30% drop in the US stock market.
“Even if a global protectionist slowdown were to extend to the UK at the same time as Brexit in the worst case, the UK’s main banking system would be strong enough to absorb, rather than amplify, the resulting economic shocks and continue to serve households and businesses in the United Kingdom, “he said.
However, the Bank said that the impact of rising expectations of not negotiating was already being seen at “much weaker” levels of investment in markets that depend on foreign investors, for example, commercial properties.
In the first quarter of this year, investment in commercial properties was less than two fifths (38%) of the average level in the last two years.
For high-risk corporate loans (leveraged loans), it was less than a fifth of the levels observed in 2017 and 2018. Prices for commercial real estate are now falling again.
The Bank also said it would review macroeconomic vulnerabilities in the economy with “open” funds, recently in the news after problems with repayments in the Neil Woodford fund.
The Bank is also beginning to work to assess the impact of climate change risks in the financial sector.