BOE FPC: UK banking system remains resilient to wide range of possible economic outcomes

Following the conclusion of the Bank of England (BOE) Financial Policy Committee (FPC) meeting on Thursday, the central bank released a statement, with the key points found below.

The UK authorities and financial sector have measures in place to limit disruption to financial services at the end of the transition period, following the UK’s exit from the EU.

Most risks to the UK financial stability that could arise from disruption to cross-border financial services have been mitigated, even if the transition period ends without the UK and EU agreeing further arrangements.

Some disruption to financial services could arise, particularly for the EU-based clients, even if it does not pose a risk to financial stability.

Irrespective of the particular form of the UK’s future relationship with the EU, we will remain committed to the implementation of robust prudential standards in the UK.

Buffers of capital exist to be drawn down in stress.

It is crucial that the causes of the disruptive ‘dash for cash’ in non-banks are fully analyzed, remedial action taken where necessary.

FPC judges corporate insolvencies will probably increase.

Crucial that the causes of the disruptive ‘dash for cash’ are fully analyzed and that, where necessary, remedial action is taken.

There is need to examine mismatch between the liquidity of assets held in open-ended funds, including money market funds.

Likely cost of corporate credit will increase following end of govt loan schemes.

After Brexit, the UK will require maintaining a level of resilience that is at least as great as that currently planned, which itself exceeds that required by international baseline standards.

It is important to examine whether central banks should have facilities to provide liquidity to wider financial system in stress.

Market reaction

GBP/USD gave back nearly 40-pips on the FPC statement release, now trading near 1.2920 region, modestly flat on the day.

The spot hit a daily high of 1.2970 after Governor Andrew Bailey sounded upbeat on the economy.