Trial now

EGB/Gilt - Unwind some of Friday's rallies


Expiries for Nov30 NY cut 1000ET (Source DTCC)


German structures


BLOCK, Green Dec Package


Modest Bounce Off Lows

MNI (London)
--Cunliffe: Brexit Aside Risks To Financial Cycle Not Obvious
By David Robinson
     LONDON (MNI) - Setting aside the obvious dangers from a disorderly Brexit,
it is not clear where the key risks to UK financial stability lie at present,
Bank of England Deputy Governor Jon Cunliffe said Wednesday.
     Cunliffe warned the key issues may lie outside the core banking system, and
arise from the rapid evolution of the financial system in recent years.
     The following are key points from the speech at the London School of
     --BOE research has found that a rapid build up in credit is a fairly
reliable indicator of a subsequent downturn but Cunliffe said that the pace of
recent credit growth appears sustainable. "Aggregate credit to the household
sector is growing broadly in line with nominal GDP, whereas before the crisis it
grew for a number of years at the rate of GDP," he said.
     -Cunliffe said that he expected the next crisis to include over extension
of credit and losses, but neither mortgage lending in the UK nor unsecured
lending are sending clear warning signals yet. The mortgage market has been
idiosyncratic, with increased risk appetite from mortgage lenders meeting
subdued demand from home buyers. "The number of mortgage transactions has
remained pretty static over the past few years," despite lenders attaching
historically low interest rates to tranches of high loan-to-value mortgages.
     Fierce competition in the mortgage market, with new entrants, can explain
the improvements on the mortgage supply side while Brexit uncertainty could
partly explain subdued demand, in Cunliffe's view.
     --He cited the possible risk posed by the rapid growth of UK leveraged
lending, with loans up around a third in 2018 in sharp contrast to slow growth
in overall corporate lending. Cunliffe warned that underwriting standards for
leveraged loans had declined markedly but he added that such loans only made a
small fraction of corporate lending.
     --The Deputy Governor noted that the Financial Policy Committee had deemed
overall financial stability risks as standard and he repeated the BOE's line
that its stress tests showed the banking system well placed to withstand even
the most disorderly Brexit.
--MNI London Bureau; tel: +44 203-586-2223; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
[TOPICS: M$B$$$,M$E$$$,M$$BE$]
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