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-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
-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
-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.
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