The Bank of England says UK banks can handle Brexit badly

LONDON (Reuters) – British banks could face a serious Brexit in March if need be, the Bank of England said Wednesday, dismissing EU warnings that lenders are inadequately prepared.

The BoE's Financial Policy Committee (FPC) has stated that UK banks have sufficient capital and would no longer need to cope with market turmoil if Britain leaves the EU next March. without agreement.

"The FPC continues to hold that the UK banking system could support the real economy through a messy Brexit," the FPC said in a statement.

On Monday, the banking supervisory authority of the European Union said the banks had not managed to make enough progress in their preparations for Brexit and that they should not hope a "miraculous" public intervention.

The FPC said banks' capital levels were now high enough to leave their so-called counter-cyclical capital buffer or CCYB unchanged at 1%, binding from the end of November.

The committee had said in March that it would review this month whether the cushion should be increased because of other risks that accrue during a credit cycle. These include mortgages on high lending ratios that increase relative to the BoE ceiling and unsecured consumer lending.

The purpose of this cushion is to ensure that banks accumulate capital to protect themselves against risk as the credit cycle recovers, which they can then exploit during a downturn. It applies above other internationally required buffers.

The FPC said Wednesday that consumer credit continues to grow rapidly, but that steps already taken to stop overheating were already having an impact, with banks reporting a significant narrowing of unsecured credit.

The FPC said that Britain had made good progress in ensuring that current derivative contracts pose no risk to the UK economy if it is not there. transition agreement on Brexit before next March.

However, he said that Britain and the EU must act. The EU has not yet said what steps should be taken to avoid a potential disruption of 29 trillion pounds of unliquidated swap contracts if there is a difficult Brexit.

The FPC also announced that it would launch in 2019 its first pilot stress test to check the ability of a number of lenders to resist a cyberattack.

The risks of the global economy remained significant and increased, the BoE said, noting that trade tensions have intensified.