Bank of England acts swiftly to quell market hysteria

THE Governor of the Bank of England moved swiftly to try and quell market fears after trading hysteria saw £122 billion wiped off the value of shares and the pound plummet to a 31-year low.

The main banks in particular were badly affected in early trading, with Barclays shares falling 35%.

Mark Carney said it was inevitable there would be a period of uncertainty following the Brexit vote as market adjustment took place.

“It will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world – some market and economic volatility can be expected as this process unfolds,” he said.

“But we are well prepared for this. The Treasury and the Bank of England have engaged in extensive contingency planning and the Chancellor and I have been in close contact, including through the night and this morning.”

He said the Bank would not hesitate to take additional measures as required as the market adjustment took place and the UK economy looked to move forward.

“These adjustments will be supported by a resilient UK financial system – one that the Bank of England has consistently strengthened over the last seven years,” said Mr Carney.

“The capital requirements of our largest banks are now ten times higher than before the crisis.

“The Bank of England has stress tested them against scenarios more severe than the country currently faces.

“As a result of these actions, UK banks have raised over £130bn of capital, and now have more than £600bn of high quality liquid assets.”

 He said this substantial capital and liquidity gave banks the flexibility they needed to continue to lend to UK businesses and households, even during challenging times.

Moreover, he said that in in order to support the functioning of markets, the Bank stood ready to provide more than £250bn of additional funds through its normal facilities.

“The Bank of England is also able to provide substantial liquidity in foreign currency, if required,” he added.

“We expect institutions to draw on this funding if and when appropriate, just as we expect them to draw on their own resources as needed in order to provide credit, to support markets and to supply other financial services to the real economy.

“In the coming weeks, the Bank will assess economic conditions and will consider any additional policy responses.”

The FCA said it was in very close contact with the firms it advised as well as the Treasury, the Bank of England and other UK authorities.

“Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for Government and Parliament,” it said in a statement.
 
“Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.
 
“Consumers’ rights and protections, including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the Government changes the applicable legislation.”
 
It said the longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK would depend, in part, on the relationship the UK sought with the EU in the future.

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