BOE FPC: UK Financial Stability Risks Remain Standard>

-BOE FPC: Main Stability Risk Comes From Debt Markets

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

that domestic stability risks "remained standard overall," with spread 

compression in debt markets the most notable threat.

     The FPC downplayed the growth in UK private sector debt, saying it 

has only been rising at a slightly faster pace than GDP and that debt 

servicing costs were low by historic standards. The striking risk came 

from compressed spread in corporate bond and sovereign debt markets, 

which in places were tighter than before the global financial crisis.

     The FPC said that UK banks were well placed to withstand Brexit 

related risks. Even with a disorderly Brexit they would not have to 

increase their capital base and could continue to support the real 

economy.

     One hefty, unresolved risk around Brexit relates to UK and 

continental European parties servicing derivative contracts after 

Brexit.

     The UK government has legislated to allow EEA counterparites to 

continue to service contracts but there has been no reciprocal offer 

from the EU authorities.

     The FPC noted the lack of progress in resolving this issue, with a 

notional stg26 trillion at stake.

-London newsroom: Tel+44 207 862 7491; email: drobinson@mni-news.com    

[TOPICS: M$$BE$]