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Bank of England Warns of Possible Disruption in Financial Services After Brexit

© REUTERS / Dado Ruvic/IllustrationEuro and pound banknotes are seen in front of BREXIT letters in this picture illustration taken April 28, 2017.
Euro and pound banknotes are seen in front of BREXIT letters in this picture illustration taken April 28, 2017. - Sputnik International
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LONDON (Sputnik) – The Bank of England said on Friday that although the UK banking system remains resilient to a wide range of possible economic outcomes and most risks to financial stability had been mitigated, the end of the Brexit transition period on 31 December might bring disruption to the UK financial system.
"Financial stability is not the same as market stability or the avoidance of any disruption to users of financial services. Some market volatility and disruption to financial services, particularly to EU-based clients, could arise", a report by the bank’s Financial Policy Committee (FPC) said.

It added that despite preparations for the end of the transition period now being in their final stages, it might be the case that some users are not yet fully ready to trade with European Union counterparts "or on EU or EU-recognised trading venues".

The United Kingdom left the European Union on 31 January, but as part of the withdrawal agreement, both sides entered an 11-month transition period to negotiate their future commercial relations.

Britain's Prime Minister Boris Johnson talks to European Commission President Ursula von der Leyen inside Downing Street in London, Wednesday, Jan. 8, 2020 - Sputnik International
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Trade talks have been at an impasse for months over wide divergences over fishing quotas, the level-playing field — the set of common rules and standards designed to prevent businesses in one country from undercutting their rivals in other countries — and governance, and both London and Brussels have said that there are strong possibilities of no deal before year’s end.

The FPC’s report said, however, that irrespective of the particular form of the UK’s future relationship with the European bloc, the Bank of England remains committed to the implementation of robust and prudential standards in the UK.

According to the report, major UK banks can absorb credit losses in the order of 200 billion pounds ($265 billion) even in the case  that unemployment rises above 15 percent or of business insolvencies due to the combined impact of the COVID-19 pandemic and Brexit.

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