INTERNATIONAL - Bank of England (BOE) governor Mark Carney doubled down on his warning that a Brexit transition period was needed to avoid disruption to the financial industry, saying a period of 18 to 24 months would be the minimum required.
Speaking at a press conference after the results of bank stress tests in London on Tuesday, he said: “We signalled back in June of this year some major risks around derivatives, around insurance, around data, around other aspects of the financial system, these cross-cutting issues and we’ve done a lot of work since then and provided considerable detail around those risks and also some potential mitigating actions.”
Carney said 6 million UK and 30 million European Economic Area insurance policyholders, and around £26 trillion (R481trn) of outstanding uncleared derivatives contracts - up from a previous estimate of 20 trillion pounds - could be affected if no agreement was reached on existing cross-border contracts.
The UK’s biggest lenders emerged from the BOE’s latest stress test with the strength to keep lending even during a “disorderly” divorce from the EU, but any transition period would be “valuable”, he said.
“We have been reviewing the contingency plans, transition plans of all the financial institutions based here, both outbound and inbound if you will, and I would say that the 24-month period remains a good estimate given where we are today.”
The BOE chief also issued a warning of the consequences for companies and households should the split from the EU prove messy. “A disorderly Brexit would have economic consequences in the short term, in our view, for growth - slower growth, higher unemployment, higher inflation, lower sterling, higher interest rates - all things being equal. That’s the direction, the broad direction.”