Bank of England warns of disruption to financial services due to Brexit – but banks ready to take £200billion hit

THE Bank of England is warning of possible disruption to financial services due to the Brexit transition.

In an update today, the BoE said most risks from a no-deal Brexit have already been reduced, but some problems could still happen.

The Bank of England is warning of possible financial disruptionCredit: Reuters

The central bank added that the disruption is mainly for the EU market, as there is less clarity about how European banks will continue processing payments.

UK banks, it said, are “generally well advanced” in providing the information between the UK and EU.

The BoE’s Financial Stability Report goes on to explain that UK lenders can afford to absorb £200billion in credit losses, although it said this is unlikely to happen.

A loss of this size would involve “incredibly severe” shocks, the BoE said.

For example, unemployment would have to rise to 15% and house prices to fall by 30%.

The report said: “Financial sector preparations for the end of the transition period with the EU are now in their final stages.

“Most risks to UK financial stability that could arise from disruption to the provision of cross-border financial services at the end of the transition period have been mitigated.”

However, it added: “Financial stability is not the same as market stability or the avoidance of any disruption to users of financial services. Some market volatility and disruption to financial services, particularly to EU-based clients, could arise.”