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Mark Carney urges Britons to be 'prudent' after Brexit vote - business live Mark Carney urges Britons to be 'prudent' after Brexit vote - business live
(35 minutes later)
1.04pm BST
13:04
Economics professor David Blanchflower, a former Bank of England policymaker, has given Mark Carney full marks for today’s performance:
most impressed by Mark Carney's performance post Brexit vote been on top of things an adult in room while politicians play children's games
12.55pm BST
12:55
Snap Summary: Mark Carney tackles the Brexit crisis
Resigning from high office (or not-so-high office) is in fashion this summer. So it’s nice to see one senior official actually knuckling down and doing his job.
Today’s press conference had one key message – Britain’s economy is suffering from the Brexit vote (as predicted), and its central bankers are on the case.
1) Bank of England governor Mark Carney has warned that the risks posed by the UK’s referendum on EU membership have “begun to crystallise”, and posing new dangers to the economy.
Presenting the BoE’s latest financial stability report, Carney said:
The UK has entered a period of uncertainty and significant economic adjustment.
The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds.”
2) The BoE isn’t sitting on its hands. Slashing the ‘counter-cyclical capital reserves’ will help banks to pump £150bn of extra lending into the economy.
But Carney also warned that this will only work if businesses and individuals actually want to borrow. And despite the slide in the pound (which could help exporters), there are clear signs that the the economy is slowing.
3) Prudence used to be a Gordon Brown favourite, before the former chancellor and PM was engulfed by the financial crisis of 2007-08.
But she has a new friend today. Asked for his advice to the UK, Carney declared that people must remain prudent:
If you are taking out a mortgage, at some stage, during the life of that mortgage, conditions will be difficult.
So you want to be sure, as a household or an individual, that you can repay that mortgage - you don’t want to lose your house or flat.
4) The bank is watching closely for signs that Britain’s most indebted households are struggling post-Brexit vote.
There could be casualties out there...
We have been concerned for some time about these issues,the interplay between high levels of household indebtedness and the housing market and the possibility that there will be more vulnerable households.”
Corrected. UK household debt is 132% of disposable income, from BoE's Stability Report pic.twitter.com/oAhxBl4gV5
5) Carney reiterated that Britain’s financial sector is in much better shape than before the financial crisis, so we should avoid another credit crunch.
The core of this system is very strong, we may see some volatility, we may see things move around, but the system is going to be there for someone who wants to buy a house or a business person with a viable plan.”
6) ....but the same can’t be said of the current account deficit, which has widened to record levels.
Carney warned that a weaker pound won’t magically solve Britain’s balance of payments woes (the fact we import more than we export). The danger is that overseas investors now shun the UK.
In the governor’s words:
In and of itself, the movement in sterling should be beneficial for the current account.
But... the pace of investment will also be quite important in terms of where the balance is going over time.
7) Carney has little time for those who point to the recovery in the FTSE 100 index (now above its pre-vote levels).
It’s better to look at the index of smaller firms, the FTSE 250 index, he says:
“In terms of the equity markets I would focus a little bit more on the domestically-focused stock, the FTSE 250 or the component of FTSE 100 that is principally serving this economy.
8) Politics is for politicians.
Carney was long rumoured to fancy a shift to Canadian politics, before a certain Justin Trudeau took the Liberal party to victory.
Today he faces criticism from Leave campaigners, who will have their hands on (or at least near) the levers of power in the UK.
But the governor brushed them aside, saying the Bank will keep doing its job and work with whoever is in power.
Updated
at 1.00pm BST
12.08pm BST12.08pm BST
12:0812:08
Carney: We'll work with BrexitersCarney: We'll work with Brexiters
Last question goes to my colleague Nils Pratley.Last question goes to my colleague Nils Pratley.
He asks Mark Carney about the criticism piled on the Bank from Leave campaigners such as Andrea Leadsom (now in the running to become prime minister).He asks Mark Carney about the criticism piled on the Bank from Leave campaigners such as Andrea Leadsom (now in the running to become prime minister).
Carney replies that “we’re not asking people to make our lives easier”Carney replies that “we’re not asking people to make our lives easier”
This is a technocratic institution. We’ll work with whoever is in government.This is a technocratic institution. We’ll work with whoever is in government.
In short, the Bank will keep sticking to its remit, publishing the reports expected under its remit. And that includes flagging up threats to the UK economy.In short, the Bank will keep sticking to its remit, publishing the reports expected under its remit. And that includes flagging up threats to the UK economy.
Carney on conflicts with MPs: We're not asking people to make our lives easier...it's our job to call it as we see itCarney on conflicts with MPs: We're not asking people to make our lives easier...it's our job to call it as we see it
That’s the end of the press conference.That’s the end of the press conference.
12.02pm BST12.02pm BST
12:0212:02
Q: Could the Bank of England really ease monetary policy much lower - some economists suggest new quantitative easing (buying bonds with new money) wouldn’t have much impact?Q: Could the Bank of England really ease monetary policy much lower - some economists suggest new quantitative easing (buying bonds with new money) wouldn’t have much impact?
Carney declines to comment on monetary policy – as today’s meeting is about financial stability.Carney declines to comment on monetary policy – as today’s meeting is about financial stability.
I think Carney should get some brightly coloured hats, so ppl know when he has his FPC vs MPC hat on. ie stop asking about interest rates!I think Carney should get some brightly coloured hats, so ppl know when he has his FPC vs MPC hat on. ie stop asking about interest rates!
12.00pm BST12.00pm BST
12:0012:00
Q: Is the Bank of England worried about the prospect of Scotland breaking away from the UK?Q: Is the Bank of England worried about the prospect of Scotland breaking away from the UK?
That’s a double hypothetical, Carney says - there’s no 2nd referendum yet, let alone a decision.That’s a double hypothetical, Carney says - there’s no 2nd referendum yet, let alone a decision.
Carney says Scotland vote is hypothetical; there's no planned referendum, and we don't know regulatory environment that would be applicableCarney says Scotland vote is hypothetical; there's no planned referendum, and we don't know regulatory environment that would be applicable
11.58am BST11.58am BST
11:5811:58
Back to the Bank of England press conference:Back to the Bank of England press conference:
Q: What discussions have you had with other central banks about the referendum?Q: What discussions have you had with other central banks about the referendum?
We have had close contact with them, Carney replies, especially in the run-up to the vote. This was effective in building mutual understanding of the risks posed by Brexit, he says.We have had close contact with them, Carney replies, especially in the run-up to the vote. This was effective in building mutual understanding of the risks posed by Brexit, he says.
He points to the ‘currency swaps’ which allows central banks to share dollars, euros, pounds, yen etc with each other.He points to the ‘currency swaps’ which allows central banks to share dollars, euros, pounds, yen etc with each other.
And the global economy faces ‘notable’ spillovers, he adds.And the global economy faces ‘notable’ spillovers, he adds.
11.53am BST11.53am BST
11:5311:53
Government meeting with major banks about Brexit risks todayGovernment meeting with major banks about Brexit risks today
UK chancellor George Osborne has welcomed the BoE’s decision to ease bank capital rules.UK chancellor George Osborne has welcomed the BoE’s decision to ease bank capital rules.
Important move by @bankofengland using tools I gave them to reduce banks' capital requirements to boost lending capacity by up to £150bnImportant move by @bankofengland using tools I gave them to reduce banks' capital requirements to boost lending capacity by up to £150bn
He also reveals that major bank bosses are heading to his offices this morning, to discuss the crisisHe also reveals that major bank bosses are heading to his offices this morning, to discuss the crisis
Meeting major banks in Downing Street shortly to discuss response to referendum result. We need great national effort to steer UK throughMeeting major banks in Downing Street shortly to discuss response to referendum result. We need great national effort to steer UK through
11.51am BST11.51am BST
11:5111:51
The decision to cut the counter-cyclical capital buffers is one of several Brexit u-turns, tweets The Sun’s political editor:The decision to cut the counter-cyclical capital buffers is one of several Brexit u-turns, tweets The Sun’s political editor:
So; banks' capital reserves to be spent, deficit to go back up, AAA credit rating lost. Six years of economics reversed in 12 days #BrexitSo; banks' capital reserves to be spent, deficit to go back up, AAA credit rating lost. Six years of economics reversed in 12 days #Brexit
Hang on, though, didn’t The Sun back Brexit??!!Hang on, though, didn’t The Sun back Brexit??!!
UpdatedUpdated
at 11.52am BSTat 11.52am BST
11.48am BST11.48am BST
11:4811:48
Structure of property investment funds may need to be reconsidered following Standard Life suspension says FCA head Andrew BaileyStructure of property investment funds may need to be reconsidered following Standard Life suspension says FCA head Andrew Bailey
11.43am BST11.43am BST
11:4311:43
Some key points from Mark Carney’s briefing:Some key points from Mark Carney’s briefing:
Carney quite rightly focussing on liquidity support to underline confidence. Correctly anticipating further pressureCarney quite rightly focussing on liquidity support to underline confidence. Correctly anticipating further pressure
Carney says 2014 stress tests shows banks are resilient: system is there for anyone who wants to buy a houseCarney says 2014 stress tests shows banks are resilient: system is there for anyone who wants to buy a house
Carney advises consumers to be prudent post Brexit - just as he would if the UK was in the 10th year of a boomCarney advises consumers to be prudent post Brexit - just as he would if the UK was in the 10th year of a boom
#Carney: the law is the law, the rules are the rules, the system is the system. ie keep on keepin' on.#Carney: the law is the law, the rules are the rules, the system is the system. ie keep on keepin' on.
11.41am BST
11:41
Q: Does the Bank of England actually have the capacity to handle Britain’s exit from the EU?
Mark Carney insists that yes, the BoE has the staff capacity to cope once Article 50 is triggered.
But until that actually happens, the financial rules do not change.
11.39am BST
11:39
City watchdog in 'very close touch' with real estate firms
Q: How worried is the Bank about Standard Life’s decision to lock down its property fund last night? (to prevent investors bailing out)
Andrew Bailey, the next head of the FCA (the city watchdog), says Standard Life has taken a ‘sensible move’ to suspend redemptions.
It prevents a stampede of money out of property funds while the underlying assets are revalued (which can take time). It would be wrong for investors at the front of the queue to get their money back, while those at the back lose out, Bailey says.
The FCA is also in “very close touch” with firms in the sector, he reveals.
Related: Standard Life shuts property fund amid rush of Brexit withdrawals
11.36am BST
11:36
Q: How low could the Bank of England cut interest rates (they’re currently 0.5%)?
Carney declines to speculate much, as the Monetary Policy Committee is due to take a decision next week.
Any measure to stimulate the economy must be well-aimed and focus on the domestic economy.
We must also consider ‘unintended consequences’, he adds. [ultra-low interest rates make it hard for banks to achieve profitability, for example]
11.34am BST
11:34
Q: What impact will the slump in the pound have on the UK economy?
Mark Carney says that it should help with Britain’s current account deficit (reminder, it’s worryingly high)
Updated
at 11.34am BST
11.32am BST
11:32
Carney's message to Britain: Be prudent
Q: What is your advice to people who are wondering about taking out a loan or mortgage?
We are advising people to be prudent, governor Carney smiles.
If you are taking out a mortgage, at some stage, during the life of that mortgage, conditions will be difficult.
So you want to be sure, as a household or an individual, that you can repay that mortgage - you don’t want to lose your house or flat.
But this is classic central bank advice, he adds. We’d tell you to be prudent if we were in the 10th year of a boom.
11.29am BST
11:29
Carney says the Bank wants to avoid a repeat of the 2007-2008 conditions, when it was out of question to seek credit.
Banks can be part of the solution not the problem says Mark Carney as banks have more capital than they need
11.28am BST
11:28
Q: Do you regret allowing banks to pay dividends in the run-up to June’s referendum?
Mark Carney insists that UK banks are financially stable.
Q: How many UK households are vulnerable to an economic slowdown?
Carney flips this question to deputy governor Jon Cunliffe.
Cunliffe says the Bank are watching the ‘cohort’ of vulnerable households closely.
Households who are highly indebted tend to cut their consumption drastically, when hit by an interest rate shock or earnings shock, Cunliffe says.
But the Bank did restrict the availability of high loan-to-value mortgages in 2014, to limit the number of highly vulnerable households, he adds.
11.23am BST
11:23
Q: Is the Bank worried about a crash in the buy-to-let market?
Carney says the Bank is watching the buy-to-let sector carefully.
He points out that the bank included a housing crash in its latest Stress Tests -- and the current environment is not a serious as modelled in those tests.
The core of the UK financial system is very strong, and it will be there for home-buyers and businesses, he insists.
11.19am BST
11:19
Carney: UK more risk averse after Brexit vote
Q: Is the Bank seeing signs of a slowdown in credit demand?
Carney says this is a crucial point -- the credit market will be driven by demand, not supply.
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.
But demand for credit will be governed by the level of uncertainty over Britain’s future, and its relationship with the EU.
UK is in a much more risk adverse environment says Carney
Updated
at 11.24am BST
11.17am BST
11:17
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?
Carney replies that there is “growing evidence” that the economy was slowing, even before the referendum.
And it is probably experiencing a “material slowing”, despite the foreign exchange moves.