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Mark Carney eases bank lending rules to fight Brexit crisis as pound hits 31-year low - live updates Mark Carney eases bank lending rules to fight Brexit crisis as pound hits 31-year low - live updates
(35 minutes later)
10.41am BST 11.19am BST
10:41 11:19
Bank of England warns of “challenging” post-Brexit outlook for financial markets, takes measures to release £150bn of lending Q: Is the Bank seeing signs of a slowdown in credit demand?
10.37am BST Carney says this is a crucial point -- the credit market will be driven by demand, not supply.
10:37 We are seeing signs that the environment is becoming more ‘risk averse’, he says. And that’s why the Bank has decided to relax credit rules, to encourage banks to lend.
Bank of England eases bank lending rules to fight Brexit panic But demand for credit will be governed by the level of uncertainty over Britain’s future, and its relationship with the EU.
Newsflash from London: Britain’s central bank has warned that the risks posed by the Brexit vote are “starting to crystallise”. 11.17am BST
In it latest financial stability report, just released, the Bank of England warns that: 11:17
“There is evidence that some risks have begun to crystallise. The current outlook for UK financial stability is challenging,” Q: The Monetary Policy Committee warned that Britain might fall into recession after a Brexit vote, but might the fall in the pound actually be a stimulus?
The BoE has also taken action to fight the looming threat of recession, by relaxing the capital control rules on UK banks. Carney replies that there is “growing evidence” that the economy was slowing, even before the referendum.
That is meant to encourage lenders to keep providing credit to the UK economy. And it is probably experiencing a “material slowing”, despite the foreign exchange moves.
Back in March, the BoE has announced that the so-called counter-cyclical capital buffer would rise to 0.5%. It has now reversed that decision, potentially freeing up an extra £150bn for lending, the BoE said. 11.16am BST
And the Bank also pledged to do more to help the economy, saying: 11:16
“The Financial Policy Committee stands ready to take actions that will ensure that capital and liquidity buffers can be drawn on as needed, to support the supply of credit and in support of market functioning.” 11.15am BST
We’ll hear more from governor Mark Carney at 11am. 11:15
10.25am BST Onto questions
10:25 Q: The FTSE 100 has recovered its early post-Brexit falls and the pound has stabilised, so aren’t markets less stressed than feared?
In five minutes, the Bank of England will publish its latest Financial Stability report...and may just announce some measures to prop up the UK economy (as explained earlier) Mark Carney replies that markets are functioning “pretty well”, although sterling volatility did hit a record high.
Updated He says sterling has moved in the way that was “necessary” to allow the economic adjustment that is needed. [by which he means that a cheaper pound should help exporters and cut imports, in theory.....]
at 10.26am BST Governor Carney adds that the FTSE 250 index gives a sense of investor expectations on the direction of the economy.
10.23am BST [The FTSE 250, which contains smaller companies, has fallen much more than the FTSE 100, and is down 2.6% today]
10:23 11.11am BST
Mark Priest of ETX Capital says Standard Life’s decision to freeze its property fund last night has spooked the City, and helped to drive down the pound. 11:11
Standard Life’s decision to close redemptions on its open-ended property fund is vitally important and shows just how precarious the situation is right now. Mark Carney says there will be no immediate changes to UK financial regulations, until Britain has actually left the EU.
This seems to have precipitated some pretty big selling in property stocks and asset managers, with Legal & General and Aberdeen Asset Management suffering nasty falls this morning. Barratt Developments and Taylor Wimpey are down 5% again. The law is the law, and the rules are the rules.
Investors are getting very nervous now as they fear Standard Life may not be the only fund that will close its doors. The last time we saw this kind of action was in the financial crisis. He is pledging to take whatever action is needed ensure monetary stability, and support the real economy.
Updated But the Bank can only do so much.....
at 10.23am BST Carney: BOE "cannot fully offset the economic and market volatility." #Brexit
10.20am BST Mark Carney: 'we have a plan, we are putting the main parts in operation and it is working'
10:20 11.09am BST
Bad news for British holidaymakers....sterling has also hit a two-and-a-half-year low against the euro, at €1.1787. 11:09
Pound also at weakest since 2013 against euro, after hitting 31-year low versus dollar https://t.co/xxGZPyhdxE pic.twitter.com/esEQBsoI0Z Mark Carney confirms that the Bank of England has decided to cut the ‘counter-cyclical capital buffer’ on UK banks.
10.16am BST This means banks need to keep less capital on their books, and can pump up to £150bn more into the economy.
10:16 This will “immediately” give banks greater flexibility to lend to UK businesses and households, declares the BoE governor.
Pound hits Bowie/Jagger levels.... He adds:
The last time the pound was this low, in 1985, David Bowie and Mick Jagger were topping the charts with Dancing In The Streets. Those businesses and households who want to seize viable opportunities in the post-Brexit world can be confident that they will be supported by the financial sector.
If the pound loses another cent, we’ll be back to 1984 levels, when Frankie Goes To Hollywood were encouraging the nation to Relax. Carney also declares that regulators will make sure that banks don’t use this flexibility to boost bonus payments, or dividends.
Click on this tweet to see more.... 11.06am BST
If the pound takes out $1.3055 we're in 'Frankie' territory. https://t.co/zKkK4L2dCp #1985 pic.twitter.com/AJm9h6jQEu 11:06
Updated Mark Carney begins his press conference by reminding us that the Bank identified the referendum as the biggest threat to the UK economy.
at 10.17am BST That warning is now being borne out, the governor says, pointing to the plunge in the pound since June 23rd.
10.06am BST He singles out UK’s current account deficit (as mentioned a few minutes ago).
10:06 There is growing evidence that the referendum has delayed major investment decisions, Carney adds.
Sterling slides to new 31-year low vs dollar at $1.3117, down 12% since Brexit vote. pic.twitter.com/Txm3Wb3OlI But on the upside, financial markets have responded well to the volatility after the referendum result, rather than adding to stress.
10.03am BST And banks are much better capitalised than before the Lehman crisis.
10:03 11.02am BST
Pound hits 31-year low 11:02
Boom! The pound just hit a new 31-year low against the US dollar. Mark Carney's press conference begins
Sterling slumped by 1.5 cents to $1.3113 following the news that UK service sector growth was hit by Brexit angst last month. The Financial Stability Report press conference is beginning now. We’ve added a live feed to the top of this blog - you might need to refresh to see it.
That’s below the levels hit after the referendum vote, and back to the sterling crisis of the mid-1980s. Alternatively, It’s also being livestreamed here (right-click to open in a new tab).
9.57am BST 10.56am BST
09:57 10:56
UK services growth slows: what the experts say You can see the report yourself, here:
Analysts are concerned that growth in Britain’s dominant services sector slowed last month, but relieved that it didn’t actually contract: Financial Stability Report, July 2016
UK PMI services a touch weaker than forecast, but still growing, and not as bad as Construction. Still 80% responses received pre-Brexit 10.56am BST
UK Services #PMI returned to 38-month low in June. Survey period covered Brexit vote after which "loss of momentum intensified". 10:56
Picture of leave effect starting to show - important services sector slowed in June, although it didn't contract like construction did More snap reaction:
9.47am BST Basic message from @bankofengland: financial system was facing growing problems before Brexit. They haven’t gone away & now we’ve got others
09:47 Bank of England post Brexit reality check: - sterling down 9%, £/$ most volatile since BW, UK banks lost 20% value pic.twitter.com/Djgpfivv3S
Economist Rupert Seggins has helpfully put the service sector report into context: 10.52am BST
The UK economy before the referendum. Services slowing, construction in trouble, manufacturing ok(ish) @TheStalwart pic.twitter.com/cACiGD4lpd 10:52
The Bank of England is also concerned about the United Kingdom’s large current account deficit, following the Brexit vote.
This deficit, between what Britain imports and exports, is “high by historical and international standards”, says the Bank.
Indeed.... -->
The Bank is worried that the flow of capital into the UK could now slow, making this deficit even bigger....
The financing of the deficit is reliant on continuing material inflows of portfolio and foreign direct investment, which have been used to finance the public sector deficit and corporate investment, including in commercial real estate.
A sudden shift in the supply of foreign capital and in the current account deficit would be associated with a sharp increase in risk premia and adjustment in sterling.
The BoE also points out the pound suffered a record fall after the referendum vote:
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10.45am BST
10:45
The Bank of England has also warned Britain’s banks not to splurge cash on payments to shareholders, or bonuses to staff:
Bank of England's FPC says banks should "not increase dividends and otherdistributions" - not that bonuses were going up in this climate.