MNI BRIEF: Tension As Markets Seek Banks' Weakness -BOE Bailey

Regulatory vigilance is key as financial market participants search for weaknesses in the banking system, Bank of England executives giving evidence to lawmakers on the Treasury Select Committee said Wednesday, adding that they were keeping a close eye on bank funding costs.

BOE Governor Andrew Bailey, giving evidence of the failure of SVB bank, said that it was a period of "heightened tension" with markets "trying to find points of weakness" in the banking system and against this backdrop they had to be very vigilant, but that so far the UK banking system has held up well. Deputy Governor Dave Ramsden noted the extreme volatility in debt and money markets, with US Treasury implied volatility at post global financial crisis highs, and he warned market stresses could feed through to the real economy.

Bailey on Monday left the door open to further rate hikes, highlighting the division between the Bank's monetary and financial stability roles, although as Ramsden noted the MPC does factor in the impact of financial shocks.