Bank of England Requests Special Powers To Avert A Financial Crisis After Brexit Defeat

With the British Parliament rejecting the latest plan to remove the United Kingdom from the European Union, Bank of England Governor Mark Carney says that he is now in discussions with the Treasury about special powers needed to smooth any financial turmoil that occurs.

The central bank governor, who stressed that market movements suggest a no-deal Brexit is unlikely, spoke to lawmakers’ hours before Prime Minister Theresa May faces a no-confidence vote in Parliament. She suffered a landslide defeat on Tuesday over her transition agreement with the European Union in Brussels. While she’s expected to survive the motion, the next steps in the Brexit process remain unclear. That uncertainty is causing financial market volatility and prompting people throughout the United Kingdom to stockpile food and medicine.

Governor Carney sought to provide reassurance, reiterating his confidence that the United Kingdom’s financial system is resilient, but said the powers the Bank of England needs to overcome a potential financial crisis should be firmly in place before March 29 when Britain will leave the European Union with or without a deal.

He said that of the powers needed, the majority have been granted, with a few remaining outstanding that are particularly relevant to winding up companies. Governor Carney said he wouldn’t put too much weight on short-term market fluctuations, but that market moves since the Parliamentary vote, including a rebound in the pound currency, seem to reflect views that the prospect of a no-deal departure has diminished.

In stress tests, the Bank of England passed all of the United Kingdom’s seven largest lenders, saying they’re strong enough to continue extending credit even during a no-deal Brexit that could send the economy into a tailspin. As Governor Carney spoke Tuesday, economic data was published showing that inflation fell to its lowest rate in almost two years in December as the cost of gasoline fell. Consumer prices rose 2.1% from a year earlier, the least since January 2017, the Office for National Statistics said. The Bank of England`s inflation target is 2%.