THE Bank of England is warning of possible disruption to financial services due to the Brexit transition.
In an update today, the BoE said most risks from a no-deal Brexit have already been reduced, but some problems could still happen.
The central bank said any issues is likely to affect EU-based clients and customers, as opposed to UK customers.
It said lenders should continue taking measures to minimise disruption.
Meanwhile, the latest Financial Stability Report goes on to explain how UK lenders are ready to take a £200billion hit in credit losses – although it said this is unlikely to happen.
A loss of this size would involve “incredibly severe” shocks, the BoE said.
For example, unemployment would have to rise to 15% and house prices to fall by 30%.
The BoE report would normally include an annual stress test to show how banks could cope with an economic shock.
However, the test was cancelled for the first time since it was launched in 2014 due to coronavirus.
The warning comes as Prime Minister Boris Johnson told the nation to prepare for a no deal Brexit.
The report said: “Financial sector preparations for the end of the transition period with the EU are now in their final stages.
“Most risks to UK financial stability that could arise from disruption to the provision of cross-border financial services at the end of the transition period have been mitigated.”
However, it added: “Financial stability is not the same as market stability or the avoidance of any disruption to users of financial services. Some market volatility and disruption to financial services, particularly to EU-based clients, could arise.”
More to follow…
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