The governor of the Bank of England today said it stands ready to pump £250 billion of extra capital into Britain’s banks in the wake of the Brexit vote.
Speaking after British voters opted to leave the European Union, Mark Carney acknowledged there would be a “period of uncertainty and adjustment following this result”.
But he added: “There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold. And it will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world.”
Carney said that market and economic volatility “can be expected” as the process unfolds, but the Bank was “well prepared for this”.
He said: “The Treasury and the Bank of England have engaged in extensive contingency planning and the Chancellor and I have been in close contact, including through the night and this morning. The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward.”
Carney said that, following a series of “stress test” carried out to check the health of banks’ balance sheets, the UK’s lenders have raised more than £130bn of capital and now have more than £600bn of “high-quality” liquid assets.
He added: “As a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities.
“We expect institutions to draw on this funding if and when appropriate, just as we expect them to draw on their own resources as needed in order to provide credit, to support markets and to supply other financial services to the real economy.”
In response, CBI chief economist Rain Newton-Smith said: “We need strong and calm leadership to reassure the markets.
“The Bank of England is clear that it stands ready to provide additional liquidity and to take other necessary measures – this should help to calm markets and shore up confidence in the UK economy.
“As the governor said, the UK’s financial system is resilient. UK banks are well-capitalised, with a large quantity of high-quality liquid assets, and have been stress-tested against tougher conditions than where we are now.”