MNI POLICY: BOE Carney: Stg Markets To Function In Any Brexit>

-BOE Carney: Extensive Contingency Plans In Place For Disruption       

     By David Robinson and Jai Lakhani                                                 

     LONDON (MNI) - Bank of England Governor Mark Carney in a letter to 

Chancellor of the Exchequer Philip Hammond outlined how the   Financial 

Policy Committee has strengthened banks' resilience and he said 

extensive planning was in place to keep sterling markets functioning 

through the most disorderly Brexit scenarios. 

     The minutes from the FPC's 20 and 27 November meetings were also 

published Wednesday. The following are key points from the letter and 

minutes. 

     -Carney said that in a disorderly Brexit market volatility was 

expected but he noted that after the June 2016 vote to leave the 

European Union sterling markets had continued to function and he 

expressed confidence that this would happen again. 

     The Bank alongside other authorities and financial companies "has 

put extensive contingency plans in place to support institutional 

resilience and market functioning during any period of heightened 

uncertainty," he said. 

     -Given the focus on preparations for Brexit, planned impact 

tolerance assessments for cyber disruption were put on hold until the 

first half of 2019. On the Committee's radar was the significant growth 

in the use of third party cloud service providers. The market is 

currently highly concentrated amongst a few providers and therefore 

disruption at one could impact the provision of services by several 

firms.   

     -Evidence supporting the resilience Governor Mark Carney speaks of 

is the fact that banks entered the 2018 stress test with an aggregate 

Tier 1 risk-weighted capital ratio of 17.7%, a striking 3.5 times higher 

than before the financial crisis. Under the 2018 stress test (which 

included a global China led recession), the risk-weighted capital ratio 

would still be at twice its level before the crisis. 

     -The minutes highlighted how the FPC had been co-ordinating work on 

the potential impact of Brext and the financial sector's resilience to 

it ever since the June 2016 referendum. 

     It was only when the Treasury Committee requested the Bank come up 

with Brexit scenario analysis, including for no deal, was the decision 

made to publish the detailed work. 

     The FPC also argued that as negotiations between the EU and UK had 

been completed in order to come up with a withdrawal agreement the 

analysis could no longer prejudice negotations, and there was no public 

interest case for keeping the Bank's work secret. 

-London newsroom: Tel+44 203 856 2226; email:                           

david.robinson@marketnews.com                                           

[TOPICS: M$$BE$,MT$$$$]