Brexit Update: BOE Steps in as “Risks Have Begun to Crystalize”
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)
#Brexit: What’s Trending?
EU Commission President Remains Critical of UK Leaders – EU Commission President Jean-Claude Juncker continues to be a vocal critic of the UK political leaders who spearheaded the Brexit vote. “The Brexit heroes of yesterday are now the sad Brexit heroes of today,” adding, “Patriots don’t resign when things get difficult, they stay.”
GBP Falls Again to Record Lows – Today the British Pound fell to the lowest levels yet since the Brexit referendum, also marking more than 30-year record lows.
UKIP Leader Steps Down – Nigel Farage, leading member of the UK Independence Party, announced Monday his intentions to resign now that the party had secured the Brexit referendum. Farage joins a number of recent politicians to step down from leadership roles in the rapidly changing government.
Forecasts for UK Businesses Deteriorate – The Centre for Economics and Business Research’s expectations index for UK businesses charted major declines reflecting growing pessimism towards the country’s economic future.
Italy’s Banking Problems Present Additional Risks to EU – Italy appears to be on the verge of a banking crisis, posing new risks to the EU economy. Italian Prime Minster Matteo Renzi continues to push back against the EU’s bank rules and austerity measures.