You wanted it, you got it: Car­ney de­fends BoE’s Brexit re­port

Gulf Times Business - - BUSINESS -

Bank of Eng­land gover­nor Mark Car­ney hit back at crit­ics of the cen­tral bank’s warn­ings of a po­ten­tially big Brexit hit to the econ­omy, deny­ing al­le­ga­tions of scare-mon­ger­ing made by some law­mak­ers who op­pose Prime Min­is­ter Theresa May’s plans.

The BoE said last week that Bri­tain could suf­fer greater dam­age to its econ­omy than dur­ing the global fi­nan­cial cri­sis un­der a worst-case exit from the Euro­pean Union.

Car­ney, speak­ing to law­mak­ers on Tues­day, de­nied a sug­ges­tion that the BoE’s sce­nar­ios were rushed out to help May get sup­port for her Brexit plan and stressed that the cen­tral bank had been asked to pro­vide them by law­mak­ers.

“There’s no exam cri­sis. We didn’t just stay up all night and write a let­ter to the Trea­sury Com­mit­tee,” Car­ney said. “You asked for some­thing that we had, and we brought it, and we gave it to you.”

Less than four months be­fore Bri­tain is due to exit the EU, it re­mains un­clear whether it will leave with a tran­si­tion deal in place to smooth the shock for the econ­omy.

May’s Brexit agree­ment with EU lead­ers faces deep op­po­si­tion in par­lia­ment, in­clud­ing from within her own Con­ser­va­tive Party, ahead of a key vote on De­cem­ber 11.

Pro-Brexit crit­ics of Car­ney, who reg­u­larly ac­cuse him of po­lit­i­cal med­dling, dis­missed last week’s BoE re­port as part of a “Pro­ject Hys­te­ria.”

For­mer BoE gover­nor Mervyn King on Tues­day lamented the cen­tral bank’s in­volve­ment in what he said was an at­tempt to frighten the coun­try about Brexit.

“It sad­dens me to see the Bank of Eng­land un­nec­es­sar­ily drawn into this pro­ject,” he said in an ar­ti­cle pub­lished by Bloomberg.

Car­ney took a cou­ple of barely con­cealed swipes at King, say­ing Bri­tain had paid the price for not fo­cus­ing on risks from the bank­ing sec­tor be­fore the global fi­nan­cial cri­sis and had mis­un­der­stood the im­por­tance of whole­sale fund­ing for lenders.

Asked by law­mak­ers about the BoE’s worst-case sce­nar­ios, he said they were “low-prob­a­bil­ity events” but ones the cen­tral bank needed to con­sider to make sure Bri­tain’s bank­ing sys­tem could with­stand any Brexit shocks.

“We’re al­ready sleep­ing soundly at night, be­cause we have the fi­nan­cial sec­tor, the core of the fi­nan­cial sec­tor, in a po­si­tion that it needs to be for a tough sce­nario,” he said.

But he said the price of food could go up by 10% if Bri­tain left the EU with no deal and with no mit­i­gat­ing ar­range­ments to avoid chaos at the coun­try’s ports.

Car­ney also said Bri­tain’s ports were not ready for even a man­aged shift to World Trade Or­ga­ni­za­tion rules for the coun­try’s ex­ports and im­ports with the EU.

“Don’t as­sert what is not cor­rect,” he snapped at one law­maker who said the BoE had not con­sid­ered the pos­si­bil­ity of sub­sti­tut­ing trade with the EU for other mar­kets.

Car­ney re­it­er­ated his op­po­si­tion to ced­ing de­ci­sion-mak­ing over rules for the bank­ing sec­tor to the EU af­ter Brexit — a po­ten­tial con­se­quence of the ‘Nor­way-style’ ar­range­ment which some law­mak­ers would pre­fer to May’s Brexit plans.

“We would not be com­fort­able...out­sourc­ing su­per­vi­sion of this in­cred­i­bly com­plex, in­cred­i­bly im­por­tant fi­nan­cial sec­tor,” he said.

Bank of Eng­land gover­nor Mark Car­ney ges­tures while speak­ing dur­ing the Fi­nan­cial Sta­bil­ity Re­port news con­fer­ence at the cen­tral bank in the City of Lon­don on Novem­ber 28. Car­ney, speak­ing to law­mak­ers on Tues­day, de­nied a sug­ges­tion that the BoE’s sce­nar­ios on Brexit were rushed out to help May get sup­port for her Brexit plan and stressed that the cen­tral bank had been asked to pro­vide them by law­mak­ers.

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