Bank of England notes that as specter of no-deal Brexit looms, UK banks will withstand even greater economic shock

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The Bank of England has said that the U.K. banks will weather an even worse economic shock than the one they are currently facing and still continue to lend to households and businesses.

It reported that banks have built up large reserves since the financial crisis more than a decade ago to help them cope with the economic problems caused by the pandemic.

The Financial Policy Committee of the central bank added that most threats to the financial stability of the United Kingdom had been mitigated before a possible no-deal Brexit, but cautioned that “some disruption to financial services could occur.”

“Given the extensive preparations by the U.K. authorities and the financial sector, the Financial Policy Committee (FPC) continues to believe that most risks to U.K. financial stability that could arise from disruptions in the provision of cross-border financial services at the end of the transition period have been mitigated.”The Financial Policy Committee (FPC) continues to believe that most of the risks to UK financial stability that might arise from disruptions in the provision of cross-border financial services at the end of the transition period have been mitigated, given the extensive preparations by the U.K. authorities and the financial sector.

He added, “Financial stability is not the same as the stability of the market or the avoidance of any disruption to financial service users.”

Some market volatility and disruption to financial services may occur, particularly for customers based in the EU.

“Regardless of the specific shape of the UK’s future relationship with the EU, and in line with its statutory duties, the FPC will continue to advocate for the implementation of robust prudential standards in the UK.”

Governor Andrew Bailey of the Bank of England has said that his officials have “plenty” in their arsenal if a no-deal Brexit creates a market shock close to what happened during the early days of Covid-19 in March.

“We have a very extensive arsenal of responses that we can take, and in any such situation we will use them.”We have a very thorough arsenal of responses that we can take and we will use them in any such situation.

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