Bank: the UK is "ready for Brexit and the fallout from the trade war"

According to the Bank of England, the UK banking system is still resisting the financial impact of Brexit's worst case.

This comment was included in his regular checkup of banks, the Financial Stability Report.

The bank said that "the perceived probability of a Brexit without a transaction has increased since the beginning of the year".

He stated that the "material risks" of economic disruption resulting from such a scenario remain.

However, there had been "some improvement in the preparation of the British economy at Brexit without agreement".

Since last year, UK banks have been forced to retain more capital and have easy access to £ 1 trillion (cash) financing.

The bank says that such a stamp would allow the banking system to continue lending to the economy, even if the UK was excluded from international markets for three months.

This test of resistance in the worst case scenario implies a contraction of the economy of 4.7%, unemployment that has more than doubled to 9.5% and a fall in property prices of 33%. %.

Absorbed shock

The Bank's main financial policy committee went further than previously by stating that the banking system would also withstand a disorderly Brexit occurring at the same time as a global trade war involving 25% customs on US-Chinese trade, a 30% drop in the US stock market.

"Even if the global slowdown due to protectionism was to reverberate across the UK along with the worst Brexit disorder, the UK banking system would be powerful enough to absorb, rather than magnify, the economic shocks to serve. British households and businesses, "he said.

The Bank said, however, that the impact of growing non-transaction expectations was already manifesting itself in "much lower" levels of investment in markets that depend on foreign investors – for example, commercial real estate.

In the first quarter of this year, investments in commercial real estate accounted for less than two-fifths (38%) of average levels in the last two years.

For high-risk corporate loans (leveraged loans), they represented less than one fifth of the levels observed in 2017 and 2018. Commercial real estate prices are again declining.

The Bank also announced that it would examine the macroeconomic vulnerabilities of the economy related to funding from "open-ended" funds recently issued after the redemption issues in Neil Woodford's fund.

The Bank is also undertaking work to badess the impact of climate change risks on the financial sector.