U.K. BANKS CAN HANDLE ’DISORDERLY’ BREXIT
But 7 top lenders must hold another £6b combined capital reserves as safeguard
BRITAIN’S lenders could support the economy through a “disorderly” Brexit, the Bank of England (BoE) said yesterday, as the sector passed its latest round of stress tests.
The central bank ruled, however, that the nation’s seven top retail banks must hold another £6.0 billion (RM32.7 billion) in combined capital reserves to safeguard against crisis.
“The stress-test scenario... encompasses a wide range of UK macroeconomic risks that could be associated with Brexit,” read a statement from the BoE’s Financial Policy Committee (FPC).
“As a result, the FPC judges the UK banking system could continue to support the real economy through a disorderly Brexit.”
BoE governor Mark Carney, speaking at a press conference, warned however that such a Brexit was “in nobody’s interest” and would have “an economic impact on households and businesses”.
Carney added that a disorderly Brexit “is not a good scenario... it is one we are all working to avoid as it has some quite material economic costs — even if the financial system continues to operate through it”.
The FPC regulator, established after the global financial crisis and tasked with safeguarding Britain’s financial system, added it would lift its so-called capital buffer rate from 0.50 per cent to 1.0 per cent from November next year.
That will give Britain’s retail lenders combined capital reserves of £11.4 billion.
Meanwhile, the European Union (EU) has given Prime Minister Theresa May until next Monday to raise Britain’s offer of divorce terms if she wants EU leaders to open talks on a future free trade pact next month.
These are key points EU officials and diplomats say she must be ready to concede when she visits Brussels on December 4.
The EU estimated at some €60 billion what Britain should pay to cover outstanding obligations on leaving in March 2019.
The EU is still seeking further commitments from May that the rights of EU citizens in Britain after Brexit will be guaranteed under EU judicial supervision, not just British — still a potential stumbling block to Britain’s agreement.
The EU wants more detail on a British pledge to avoid a “hard border” at the new land frontier on the island of Ireland that might disrupt peace in Northern Ireland. London says the detail depends on the future trade agreement.
On December 6, two days after May meets European Commission president Jean-Claude Juncker and Brexit negotiator Michel Barnier, EU-27 envoys meet to start drafting the conclusions for a summit on December 14-15. They may need a whole week to secure all states’ agreement that there is “sufficient progress” — or not.
At the summit, if they agree to move ahead, the 27 leaders could approve formal negotiating guidelines for a future trade deal. Agencies