2017.11.2805:58:00UTC+00UK Banking System Capable To Resist Disorderly Brexit: BoE

The UK banking system could support the real economy even through a disorderly Brexit, according to the Financial Stability Report, released by the Bank of England on Tuesday.

In an adverse scenario, capital buffers would be drawn down substantially and, as a result, banks would be more likely to restrict lending, the central bank said Tuesday.

The results of the annual stress test showed that for the first time since the test started in 2014, no bank in the UK needs to strengthen its capital position.

The test revealed that the domestic banking system is resilient to deep simultaneous recessions in the UK and global economies, large falls in asset prices and a separate stress of misconduct costs.

The BoE noted that the economic scenario in the test was more severe than the global financial crisis.

In the test, banks incurred losses of around GBP 50 billion in the first two years of the stress. The stress test showed that these losses can now be absorbed within the buffers of capital that banks have on top of their minimum requirements.

The Financial Policy Committee raised the system-wide UK counter-cyclical capital buffer rate, which applies to all banks, to 1 percent from 0.5 percent.

The FPC will review the adequacy of the counter-cyclical capital buffer rate again in the first half of 2018.

According to the FPC, there are potential risks arising from the macroeconomic consequences of some possible Brexit outcomes.

BoE Governor Mark Carney said a transition period of 18-24 months after the Brexit would be the minimum required. It is increasingly appreciated on both sides of the channel, he added.

He described the growth in consumer credit as "pockets of risks".