UK financial system resilient to disorderly Brexit: BoE

Carney speech: UK exporters to EU show a mixed picture on no-deal preparedness

UPDATE 1-BoE says British banks ready for no-deal Brexit, trade war

RBC, a primary dealer of British government bonds, said in a research note to clients that the BoE will soon have to ditch its main message that rates will need to rise at some point - even if Brexit goes smoothly.

These comments came via the bank's periodic financial stability report which details the current status of the British financial system as well as its possible future status. For example, since the previous year, banks in the United Kingdom have been forced to hold onto more of their capital and demonstrate access to a trillion pounds in liquidity.

THE Bank of England has said the UK's lenders could withstand the worst case no-deal Brexit and a full-scale global trade war, but warned "material risks of economic disruption" remain from a cliff-edge European Union withdrawal.

But it warned "material risks" remain to the economy as the threat of a no-deal Brexit has increased, while rising global trade tensions also pose a significant threat to global growth.

"Even if a protectionist-drive global slowdown were to spill over to the UK at the same time as a worst-case disorderly Brexit, the core UK banking system would be strong enough to absorb, rather than amplify, the resulting economic shocks and continue to serve UK households and businesses", it said. He added: "Brexit developments are taking place against a backdrop of increasing risk to the global economic outlook".

The new report comes just a day after analysis from the Department for the Economy warned that a no-deal Brexit could risk 40,000 jobs in the north, result in the crash of cross-border agri-food trade and a slump in investment from foreign companies. British banks were better prepared for a downturn than they were before the 2008 financial crisis when they held much less capital and required multi-billion-pound bailouts.

The FPC said it would team up with a fellow regulator, Britain's Financial Conduct Authority, to assess whether investment funds should be required to set lengthier withdrawal periods for investors if they hold hard-to-sell assets such as commercial property.

For high-risk corporate borrowing (leveraged loans), it was a less than a fifth of the levels seen in 2017 and 2018.

The Bank also said it would be reviewing the macro-economic vulnerabilities of the economy on funding from "open-ended" funds, recently in the news after the problems with redemptions in Neil Woodford's fund. Bank of England Governor Mark Carney also flagged ongoing concerns about illiquid investment funds, liquidity shocks, crypto-currencies and environmental dangers at a half-yearly update on the risks facing Britain's banking system.

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