Carney abandons capital requirements

Graham_Devon

Because of the brexit vote and likely slower economy.

Seems a major, and quite risky change "just incase" the economy slows.

The Bank of England has eased special capital requirements for banks saying that the outlook for UK financial stability is "challenging", following the vote to leave the European Union.

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," he said.

http://www.bbc.co.uk/news/business-36712040

Thrugelmir

Shows how fragile the UK is and how concerned the BOE is about overall indebtedness. While the headline says abandoned. This is only a temporary measure until June 2017. Banks will continue to contract their balance sheets in an orderly fashion. Carney is simply providing the stability required.

DiggerUK

Graham_Devon wrote: »

Because of the brexit vote and likely slower economy. .........

The Brexit vote is a false flag, the economy is still in a mess. Bremain would not have changed that.

Expect reduced interest rates, and more QE. Might even see some helicopter money..._

michaels

Graham_Devon wrote: »

Because of the brexit vote and likely slower economy.

Seems a major, and quite risky change "just incase" the economy slows.

http://www.bbc.co.uk/news/business-36712040

Almost feels like the boe and treasury are trying to engineer a run on sterling and the banks in order to be able to say 'I tiold you so' / overturn the referendum result by making it seem that persuing brexit is too ruinous to continue....

Graham_Devon

michaels wrote: »

Almost feels like the boe and treasury are trying to engineer a run on sterling and the banks in order to be able to say 'I tiold you so' / overturn the referendum result by making it seem that persuing brexit is too ruinous to continue....

Does seem a bit like that. As soon as sterling started to rise steadily over a few days, Carney announced the "possibility" of lower interest rates, which knocked 1.5% off against the dollar within an hour.

He also said today that brexit risks are begining to crystalise, but the only real reference is foreign buyers "may" reduce their investment into UK property. Which is no bad thing. Part of that same statement though had the risk of BTL's pulling out of the market - which was nothing to do with Brexit.

Again, since Carney's intervention today, we've hit new lows for sterling. The FTSE100 also fell as soon as he released his statement.

Seems were being told it's all gloomy, rather than it actually being gloomy (at least, when looking at market movements).

Thrugelmir

michaels wrote: »

Almost feels like the boe and treasury are trying to engineer a run on sterling and the banks in order to be able to say 'I tiold you so' / overturn the referendum result by making it seem that persuing brexit is too ruinous to continue....

Perhaps they are simply trying to keep the UK financial system stable. The UK relies heavily on overseas funding. Reducing capital requirements improves the banks liquidity ratios. Little point either of imposing measures the banks will fail to meet in the short term. Direction of travel is unchanged just a less direct route.

mwpt

michaels wrote: »

Almost feels like the boe and treasury are trying to engineer a run on sterling and the banks in order to be able to say 'I tiold you so' / overturn the referendum result by making it seem that persuing brexit is too ruinous to continue....

wotsthat

The BoE and Treasury were quite clear that, in their opinion, Brexit posed the biggest near term risk for the UK economy. I don't see why that view would be changed because 10 days have passed and the sun has risen every morning. Or why they wouldn't try and do something about it.

Obviously I'm worried about it because the 23rd June 2016 heralded in a new era of prosperity and measures like this and abandoning plans to reduce the deficit to zero by 2020 may well cause the economy to overheat.

Filo25

Sterling had already started to selloff before Carney's statement this morning, it steadied for a while in response to his statement and then resumed its selloff again.

Nice try though.

wotsthat

Graham_Devon wrote: »

Does seem a bit like that. As soon as sterling started to rise steadily over a few days, Carney announced the "possibility" of lower interest rates, which knocked 1.5% off against the dollar within an hour.

Apart from a quick dip in 1980 sterling has never been weaker (at least as far ago as I looked vs $ - 1953).

The daily movement is neither here nor there. It's the difference between a 35 year low and a 34.5 year low. In that context Carney's announcement is irrelevant.

Carney hasn't moved markets - the £ is on its !!!! and, IMO, staying there for a while.. Some might see this as unbridled good news - I don't.

hildosaver

DiggerUK wrote: »

The Brexit vote is a false flag, the economy is still in a mess. Bremain would not have changed that.

Expect reduced interest rates, and more QE. Might even see some helicopter money..._

What BREXIT has done is greatly increase the speed of things occurring which in turn is fueling panic in markets. Although many of the issues in the economy may have occurred with Bremain anyway they would not (most likely) occurred at the speed we are seeing now and as a result we may have been able to deal with them in a more planned way. I fear BREXIT has opened Pandora's box and the fear in the markets could lead to a domino effect of problems that could have a devastating impact on the UK's economy for the next decade.