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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/nov/28/bank-of-england-stress-tests-financial-stability-released-live
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| Stress tests: Bank of England warns disorderly Brexit would be painful - live! | |
| (35 minutes later) | |
| The press conference wraps up with another warning from Mark Carney that a no-deal Brexit would be undesirable for everyone involved. | |
| Q: Is the Bank of England concerned about the row at the London Stock Exchange over its leadership? | |
| Mark Carney replies that the LSE plays an important role in UK financial stability. Its CEO Xavier Rolet has made an “extraordinary contribution....but everything comes to an end”. | |
| Carney says he’s “a bit mystified” by the row over Rolet’s succession. | |
| [Explainer: Rolet’s departure was announced last month. It has since emerged that he had been asked to step down by the board, after falling out with chairman Donald Brydon. | |
| Activist investor the Children’s Investment Fund is now demanding that Brydon leaves, and Rolet stays on #developing #popcorn] | |
| Q: Are UK banks being too complacent about the impact of Fintech, by assuming they can cut costs while maintaining market share? | Q: Are UK banks being too complacent about the impact of Fintech, by assuming they can cut costs while maintaining market share? |
| That’s the challenge, Carney replies. | That’s the challenge, Carney replies. |
| UK banks are assuming that they can use new technology to bring down the cost of acquiring new customers. | UK banks are assuming that they can use new technology to bring down the cost of acquiring new customers. |
| From next year, it will be easier for customers to shift accounts. And that could mean that some banks become less “front-facing”, as new challengers reshape the industry. | From next year, it will be easier for customers to shift accounts. And that could mean that some banks become less “front-facing”, as new challengers reshape the industry. |
| The City has taken the stress test results in its stride. Shares in HSBC and RBS are up a little, while Barclays and Lloyds have dipped. | The City has taken the stress test results in its stride. Shares in HSBC and RBS are up a little, while Barclays and Lloyds have dipped. |
| UK banks fairly muted reaction to stress test results $RBS $BARC $LLOY #banks pic.twitter.com/TZII3vVncX | UK banks fairly muted reaction to stress test results $RBS $BARC $LLOY #banks pic.twitter.com/TZII3vVncX |
| Mary Carney is reiterating that UK banks could handle a hard Brexit -- but there could be trouble if they also faced a wider downturn. | Mary Carney is reiterating that UK banks could handle a hard Brexit -- but there could be trouble if they also faced a wider downturn. |
| Banks are resilient to a disorderly Brexit, the question is what if something else happens at the same time says BoE's Mark Carney | Banks are resilient to a disorderly Brexit, the question is what if something else happens at the same time says BoE's Mark Carney |
| *CARNEY: DISORDERLY BREXIT WOULD RESULT IN LOWER STERLING & WEAKER ECONOMY | *CARNEY: DISORDERLY BREXIT WOULD RESULT IN LOWER STERLING & WEAKER ECONOMY |
| Q: Are you concerned about the state of the UK mortgage market today? | Q: Are you concerned about the state of the UK mortgage market today? |
| Mark Carney says the FPC have put several restrictions in place in recent years, to precent lenders from making unduly risky loans. Those measures seem to be working. | Mark Carney says the FPC have put several restrictions in place in recent years, to precent lenders from making unduly risky loans. Those measures seem to be working. |
| Today’s stress tests also found that buy-to-let mortgages would suffer the bulk of the losses if there was a financial crisis. | Today’s stress tests also found that buy-to-let mortgages would suffer the bulk of the losses if there was a financial crisis. |
| Loans to owner-occupiers would be much more modest. | Loans to owner-occupiers would be much more modest. |
| In other words, families would keep paying off their mortgages even if the economy went into recession, but some buy-to-let lenders might struggle to meet their obligations. | In other words, families would keep paying off their mortgages even if the economy went into recession, but some buy-to-let lenders might struggle to meet their obligations. |
| Carney - The losses on buy to let mortgages are 4 times the losses on owner occupier mortgages under bank stress tests of rate rise from 0.5% to 4% | Carney - The losses on buy to let mortgages are 4 times the losses on owner occupier mortgages under bank stress tests of rate rise from 0.5% to 4% |
| Q: Who will bear the biggest burden from a disorderly Brexit, UK households or the banks? | Q: Who will bear the biggest burden from a disorderly Brexit, UK households or the banks? |
| We hope that the banks bear the burden, Carney grins. That’s why they have capital reserves, to cope with tough times. | We hope that the banks bear the burden, Carney grins. That’s why they have capital reserves, to cope with tough times. |
| The governor says: | The governor says: |
| What we want...is that people who could get mortgages prior to that event can still get mortgages. If you’ve got a good business ides you can still get funding post-Brexit. | What we want...is that people who could get mortgages prior to that event can still get mortgages. If you’ve got a good business ides you can still get funding post-Brexit. |
| But at disorderly Brexit would still have an ‘economic impact’ on households and businesses. | But at disorderly Brexit would still have an ‘economic impact’ on households and businesses. |
| “There will be some pain associated with that”, Carney concludes; the Bank’s job is to dampen that pain. | “There will be some pain associated with that”, Carney concludes; the Bank’s job is to dampen that pain. |
| Carney: a sharp, disorderly Brexit would lead to an "economic impact on households and businesses. There would be some pain associated with that, this is about dampening that" @bankofengland | Carney: a sharp, disorderly Brexit would lead to an "economic impact on households and businesses. There would be some pain associated with that, this is about dampening that" @bankofengland |
| Q: Do regulators on the continent understand the dangers of a disorderly Brexit to the EU? | Q: Do regulators on the continent understand the dangers of a disorderly Brexit to the EU? |
| Carney says there is an “increased appreciation” of these issues on the continent, and the Bank is in regular contact with EU officials about these issues. | Carney says there is an “increased appreciation” of these issues on the continent, and the Bank is in regular contact with EU officials about these issues. |
| He singles out the risks of cross-border insurance and derivatives contracts -- these issues can be fixed, but they take time, he says sternly. | He singles out the risks of cross-border insurance and derivatives contracts -- these issues can be fixed, but they take time, he says sternly. |
| The BBC’s Simon Jack nails it: | The BBC’s Simon Jack nails it: |
| Carney - Disorderly Brexit is something we are all working to avoid because there will be significant disruption - but won't be worse than the economic stresses we have put in the tests ie 33% fall in house prices and doubling of unemployment. Not very comforting. | Carney - Disorderly Brexit is something we are all working to avoid because there will be significant disruption - but won't be worse than the economic stresses we have put in the tests ie 33% fall in house prices and doubling of unemployment. Not very comforting. |
| Q: Will next year’s stress tests include a specific test for a disorderly Brexit? | Q: Will next year’s stress tests include a specific test for a disorderly Brexit? |
| No, says Mark Carney. In 12 months time it will be too late. | No, says Mark Carney. In 12 months time it will be too late. |
| Mark Carney @bankofengland says disorderly Brexit is "highly unlikely" and all parties are working towards avoiding it | Mark Carney @bankofengland says disorderly Brexit is "highly unlikely" and all parties are working towards avoiding it |
| Stress tests assumed UK GDP falls 4.7%, unemployment rises to 9.5%, house prices fall 33%. Carney says Hardest Brexit no worse than this. | Stress tests assumed UK GDP falls 4.7%, unemployment rises to 9.5%, house prices fall 33%. Carney says Hardest Brexit no worse than this. |
| Q: What is the impact of a disorderly Brexit on the banking sector, compared to an orderly one? | Q: What is the impact of a disorderly Brexit on the banking sector, compared to an orderly one? |
| Mark Carney explains that today’s stress tests modelled a huge recession -- with growth slumping, unemployment tumbling, and the pound shedding a quarter of its value. | Mark Carney explains that today’s stress tests modelled a huge recession -- with growth slumping, unemployment tumbling, and the pound shedding a quarter of its value. |
| Under that scenario, UK banks lose £50bn of capital - but aren’t sunk by those losses. | Under that scenario, UK banks lose £50bn of capital - but aren’t sunk by those losses. |
| So... a disorderly Brexit wouldn’t be any worse than that. | So... a disorderly Brexit wouldn’t be any worse than that. |
| Carney says the Bank is putting its money where its mouth is, as it would be called on to support the UK banking scenario if Brexit goes badly. | Carney says the Bank is putting its money where its mouth is, as it would be called on to support the UK banking scenario if Brexit goes badly. |
| He warns: | He warns: |
| This [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. | This [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. |