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Bank: UK ‘prepared for Brexit and trade war fall-out’

The Bank of England says the UK banking system is still resilient to the financial impact of a worst-case disorderly Brexit.

The comment came in its regular health check on the banks, the Financial Stability Report.

The Bank said “the perceived likelihood of no-deal Brexit has increased since the start of the year”. It said that “material risks” of economic disruption from such a scenario remain.

However, there had been “some improvement in the preparedness of the UK economy for no-deal Brexit”. Since last year, UK banks have been forced to hold back more capital, and demonstrate easy access to £1 trillion in funding (liquidity).

The Bank says that such a buffer would allow the banking system to continue to lend into the economy, even if the UK were shut out of international markets for three months.

This worst-case scenario stress test involves the economy shrinking by 4.7%, unemployment more than doubling to 9.5% and property prices falling by 33%.

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