Bank of England seeks to bolster EU-exit assurances but emphasises caution

Keeping an assured but cautious outlook on the impact risks of the UK’s EU Referendum


In its latest report assessing the financial stability of the UK, the Bank of England acted further in early-July to bolster its assurances around measures taken to address potential risk exposures and events in the wake of the EU Referendum result. As part of a range of measures to free-up capital funds for investment and corporate and personal credit-lending in the UK, has been an immediate reduction in the required cyclical capital buffers of commercial and credit institutions such as banks and building-societies etc.


In addition, there was a clear statement that there are no appetite or plans to make changes to UK banking regulations within the UK before any withdrawal of EU membership is achieved, with firms expected to abide by follow the working principle that the existing ‘laws remains the law’ and the ‘rules the rules’ until such time as they (ever) change. This directly echoes the stance of the UK conduct regulator (FCA) who similarly advocated that firms would be expected to continue to plan for known and expected changes and continue to maintain compliance with all existing regimes and work towards the implementation of scheduled ‘pipeline’ developments during any period of EU withdrawal. And the UK Information Commissioners Office (ICO) has commented it intends to work with Government on the implications on data protection reforms in the UK and would advocate nay reform process remain a necessity.


There is some optimism that UK financial markets, mechanisms and business sectors have initially been adjusting to pressures on supply and demands and also prices, and especially in respect to gilt/bonds, equity and foreign currency investments and volatilities.


The UK clearly wants to protect its status and role in the international financial system, and regulatory supervisors and policymakers therefore continue to be active in ensuring levels of confidence in the overall resilience and contingency arrangements in place across the UK financial systems and industry remain proportionate and responsible in the face of the prevailing outlook for the financial system and investor/consumer perceptions and expectations.


Early pressures on investor redemptions, and especially those involving commercial-asset based UK investments, portfolios and funds, has already seen some providers facing the temporary suspension of trading, and prompted the UK conduct regulator (FCA) to issue guidance to firms on prudently and effectively handling the pressures and addressing the impacts of such decisions and powers in light of their continued regulatory, market, consumer and governance obligations. Such market-confidence pressures and liquidity concerns have also prompted some initial speculation, but not realised (at time of writing), for some further easing of monetary policy to stimulate the UK economy with the possibility of reductions UK interest base-rates to new historical lows. Whatever, the emphasis remains on a measured and assured approach towards financial system and economic stability