Bank of England Governor Mark Carney said the possibility of a no-deal Brexit has decreased after Boris Johnson won the general election.
"The worst case scenario is effectively a no-deal disorderly Brexit," Carney told reporters after the release of Financial Stability Report.
"The probability of that scenario has gone down because of the election results and the intention of the new government. The scenario itself and the risks that we protect the system against has not itself changed, it's just become less likely," he added.
"What people would expect us to do is to continue to ensure that the system is ready," Carney said.
In the report, the Financial Policy Committee said major UK banks are strong enough to withstand deep recession in the UK and global economies.
The stress test noted that the major UK banks' aggregate common equity Tier 1 capital ratios after the 2019 stress scenario would still be more than twice their level before the crisis.
Further, the UK financial system is resilient to, and prepared for, even for a worst-case disorderly Brexit. Moreover, most risks to UK financial stability that could arise from disruption to cross-border financial services in a worst-case disorderly Brexit have been mitigated, the FPC observed.
The bank decided to raise the countercyclical capital buffer rate that it expects to set in a standard risk environment from 1 percent to 2 percent. This hike will help banks to absorb up to GBP 23 billion of losses.
The FPC said if a major economic stress were to materialize, it is prepared to cut the UK countercyclical capital buffer rate.
The material has been provided by InstaForex Company - www.instaforex.com
source http://www.mt5.com/forex_news/quickview/2148477/
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