From the BBC:
The Bank of England has warned there is evidence that risks it identified with Brexit are beginning to emerge. In a major report it states: "There is evidence that some risks have begun to crystallise. The current outlook for UK financial stability is challenging."
To help lubricate the financial system it has eased special capital requirements for banks. The move potentially frees up £150bn for lending, the bank's Financial Policy Committee (FPC) said. That could help if uncertainty caused by leave vote causes the economy to slow down and banks to be cautious.
"This is a major change," said Bank of England governor Mark Carney. "It means that three-quarters of UK banks, accounting for 90% of the stock of UK lending, will immediately - immediately - have greater flexibility to supply credit to UK households and firms."
… It said there were risks apparent in the commercial property market, with vital foreign inflows falling by 50% in the first three months of 2016.
The FPC also has concerns over "the high level of UK household indebtedness [and] the vulnerability to higher unemployment and borrowing costs" for some households. House prices could also come under pressure, particularly if buy-to-let investors abandon the market, it said…
The Bank would reduce the level of the buffer - set to be introduced next year - from the planned 0.5% of a banks' lending "exposure" to 0%. The 0% rate would be maintained until at least June next year, the FPC said…
"These measures are really about Carney aligning the Bank of England's guns in case the UK economy enters a downturn. Markets are going to be reassured by his pro-activity," said James Athey from Aberdeen Asset Management Investment. "He's not waiting for anything bad to happen but rather acting in case it does. It also means that both halves of the BoE: the monetary policy and financial policy are pulling in the same direction."
A glorious mess of contradictions there. They've got "concerns over the high level of UK household indebtedness" and their knee jerk is to encourage more borrowing by scrapping one of the few sensible measures introduced the last time the land price/credit bubble looked like popping?
And how can they justify measures on the basis that "risks… are beginning to emerge" or "have begun to crystallise"? What sort of double-think is that? The commenter from Aberdeen Asset Management is a bit more honest about it at least - to paraphrase "We've got to take measures to pump up the land price and credit bubble as long as there is a perceived risk that Something Bad will happen. If we sit tight, the likelihood is that nothing bad will happen and we will have missed a golden opportunity."
Tuesday, 5 July 2016
From the BBC: