Bank of England governor Mark Carney has moved to try and soothe the markets, reassuring investors and UK citizens that the Bank is ready to deal with the “volatility” following the UK’s vote to leave the European Union overnight.
Speaking from the Bank of England on Friday morning, Carney said that the Bank is “ready to provide more £250 billion of additional capital to its normal operations.” Essentially the BoE is ready to prop up the UK’s financial system to protect it from the direct impacts of Brexit.
Here is a larger extract from Carney’s speech (emphasis ours):
“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. The Bank of England is also able to provide substantial liquidity in foreign currency, if required. 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 the coming weeks, the Bank will assess economic conditions and will consider any additional policy responses.”
He also hinted at a potential interest rate cut in the next few weeks. “In the coming weeks the bank will assess economic conditions and we will consider any additional policy responses. We’ve taken all the necessary steps to prepare for today’s events.”
“It will take some time for the UK to establish relationships with Europe and the rest of the world…but we are well prepared for this…The capital requirements of our largest banks are now 10X higher than before the financial crisis,” he added.
Earlier this morning, a statement from the Bank read: “The Bank of England is monitoring developments closely. It has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks.”
Britain’s financial markets have responded broadly well to Carney’s comments, with the FTSE 100 climbing a little as Carney spoke. Here is the chart: