The Bank of England has called in the chief executives of the UK’s biggest banks to hold crisis talks following the country’s vote to leave the European Union late last week.
Bank chiefs were called into the Old Lady of Threadneedle Street, as the BoE is nicknamed, on Wednesday to discuss the state of the UK’s financial system after the Brexit vote, according to a report from the Financial Times.
The Bank of England declined to comment to the FT and did not respond to an email requesting comment from BI.
Citing a “person briefed on the meeting,” the FT says that the chief executives of HSBC, Barclays, Lloyds, RBS, and Standard Chartered, along with representatives from Nationwide, TSB, and others, were given reassurances about the amount of liquidity in the financial system. BoE governor Mark Carney reassured the markets on Friday morning that the Bank stands ready to provide as much as £250 billion in extra capital to the system if needed.
CEO were also encouraged by the Bank of England to keep lending to both consumers and companies to ensure that there is no repeat of the “credit crunch” of 2008 when lending dried up following the collapse of Lehman Brothers. That set in motion the wheels of the global financial crisis. Lenders were given assurances that the Bank continues to closely scrutinise the areas of the British economy that are most worrying lenders, including the UK’s rampant housing market.
Lenders were given assurances that the Bank continues to closely scrutinise the areas of the British economy that are most worrying lenders, including the UK’s rampant housing market.
There was also a broader discussion of the way the markets handled the wild volatility seen on Friday and the expected impacts on the broader UK economy. Carney had warned before the referendum that a Leave vote could tip the UK into recession.
While he was present for some time during the meeting, Carney did not chair it, according to the FT. That role was taken by another “senior central bank official.”
The Bank of England’s crisis talks come just a day after ratings agency Moody’s downgraded the credit outlook of more than a dozen UK banks to “negative,” saying: “We expect lower economic growth and heightened uncertainty over the UK’s future trade relationship with the EU to lead to reduced demand for credit, higher credit losses and more volatile wholesale funding conditions for UK financial institutions.”
Since the UK’s Brexit vote, banking stocks have taken a huge hit, with shares in RBS and Barclays falling so quickly on Monday that they were briefly halted.