Bank of EnglandMar 16 2018

Bank of England warns of 'material risks' from Brexit

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Bank of England warns of 'material risks' from Brexit

A “disorderly” Brexit, where no deal is agreed between the UK and the EU, is a “material risk” to the financial system, according to the Bank of England.

The bank’s Financial Policy Committee, the division which monitors the level of risk in the financial system, said in its view since November the United Kingdom has made progress towards mitigating risks of disruption to the availability of financial services.

"Nonetheless, material risks remain", it said, "particularly in areas where actions would be needed by both the UK and EU authorities".  

"The FPC re-emphasises the importance that preparations continue to be made and actions taken by relevant authorities to tackle these risks,” it said.

The Bank of England comments follow analysis from Axion, a legal services provider, which suggested as many as 7.5m contracts in the derivative and insurance markets will need to be rewritten when the UK leaves the EU. 

The central bank said the UK commercial banking system can withstand the threat of a disorderly Brexit, so it has not raised the proportion of assets banks must hold as regulatory capital, as a result of Brexit.

This decision was made by the Bank of England in November 2017. In its latest update it said nothing has changed in the past six months to prompt it to change its mind.

The FPC also said crypto currencies do not currently pose a risk to the financial system, but they are monitoring the impact of those products.

David.Thorpe@ft.com