Tuesday preview: BoE's financial stability report to spell out Brexit risks

Bank of England Governor Mark Carney is expected to reveal further details of post-Brexit risks to the UK economy in its financial stability report on Tuesday.

In a speech last week, Carney suggested that an interest rate cut was likely in summer to cushion the blow of the economic impact following Britain’s decision to leave the European Union.

He also mentioned the half-yearly financial stability report would spell out in further detail the kind of challenges the UK faces.

“Next Tuesday, the independent financial policy committee will release its biannual assessment of risks in its financial stability report, and it will take any further actions it deems appropriate to support financial stability.”

Any remarks on measures to help banks free up capital and keep loans flowing to businesses and households will be closely watched in Tuesday’s assessment of financial risks.

A temporary reduction in counter-cyclical capital buffers may be proposed to help banks.

A boost to the funding for lending scheme, which provided cheap loans to banks in return to lending, is also a possibility.

“Tuesday’s financial stability report could prove to be significant, perhaps for a cut in the counter-cyclical capital buffer,” Investec said.

“The governor conveyed a concrete message that financial and monetary policy will act in the same direction. Presumably this applies to credit policy too, with the possibility of a widening and an extension in the funding for lending scheme.”

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