Post Brexit: Bank of England bolsters British banks in wake of Brexit
The Bank of England took steps on Tuesday (July 5) to ensure British banks keep lending and insurers do not dump corporate bonds during a “challenging” period that looks set to follow the country’s vote to leave the European Union.
Risks the central bank had anticipated before the vote are starting to materialise, policymakers said, including in commercial property — where late on Monday insurer Standard Life had to halt withdrawals from its main British real estate fund.
The central bank also said it was closely monitoring investors’ willingness to fund Britain’s large current account deficit, as well as high levels of household debt and the subdued global economic outlook.
“The FPC is announcing today, that it’s reducing the counter-cyclical buffer on banks’ UK exposures from half a percent to 0 percent with immediate effect.” Said Bank of England Governor, Mark Carney. “This is a major change, it means that three-quarters of Uk banks accounting for 90 percent of the stock of UK lending will immediately have greater flexibility to supply credit to UK households and firms. Specifically, the FPC’s action immediately reduces the regulatory capital buffers by 5.7 billion pounds, and therefore raises those banks’ capacity to lend to businesses and houshold by up to 150 billion pounds.”
Sterling dropped more than 10 percent against the dollar and banks’ share prices fell by a fifth after Britons unexpectedly voted on June 24 to leave the EU, prompting Prime Minister David Cameron to say he would step down.