BOE FPC: Sees UK Fincl System Resilient To Worst-Case Brexit>

-BOE FPC: 2018 Stress Test Covers Worst Brexit Outcomes

-FPC Leaves Countercyclical Buffer Unchanged At 1%

     By Irene Prihoda and Les Commons

     LONDON (MNI) - The Bank of England Financial Policy Committee still 

sees the UK financial system as resilient to, and prepared for, the wide 

range of future risks it could face, including a worst-case disorderly 

Brexit, according to the July Financial Stability report, published 

Thursday.

Following are the main points from the Bank's FSR:

--Although the perceived likelihood on a 'no-deal' Brexit has increased 

since the start of the year, but preparations made by UK financial 

institutions see them in a good position to navigate any issues.

--The FPC still sees its 2018 bank stress test of major UK banks as 

sufficiently severe to cover the wide range of  shocks that could emerge 

from a 'no-deal Brexit', as the test scenario was more severe than the 

global financial crisis. 

--The Bank, in its list of short-term concerns, sees a continuing and 

deepening trade war between the U.S. and China as a threat to business 

confidence and poses downside risks to global growth.

--However, as in the case of Brexit, the FPC thinks the 2018 stress test 

leaves UK banks in a position to deal with the worst case scenario. The 

BOE FPC also thinks the system could deal with a 'no-deal' Brexit and 

the spillover effects for the UK from a full=scale global trade war.

--The FPC again stressed concerns over open-ended funds and their 

potential to become a systemic risk via ongoing daily redemption terms 

and the liquidity of OEF assets. The FPC said it is looking into how 

funds may better align redemption terms and liquidity along with the 

Financial Conduct Authority.

--The FPC points to LIBOR, or at least the transition away from LIBOR, 

as a continuing medium-term risk to stability and urges a continuation 

of the move to alternative benchmark rates by end-2021. 

--The FPC left the countercyclical capital buffer  unchanged at 

1.0% but maintained it was ready to move it any direction as the risk 

environment evolved.

--UK News Desk: ueditorial@marketnews.com, call 0203 865 3812

[TOPICS: M$$BE$]