Mark Carney Says He Laid Out Stress-Test Scenarios to U.K. Cabinet

(Bloomberg) -- Mark Carney has confirmed that he was laying out the Bank of England’s stress-test scenarios for lenders when he addressed senior U.K. ministers last month on the dangers of a no-deal Brexit.

Following that cabinet meeting, it was reported that the BOE governor had warned that crashing out of the European Union without an agreement could see mortgage rates raised even as economic output and house prices tumble.

In a letter on Wednesday to Nicky Morgan, chair of the Treasury Committee, Carney said he was discussing stress scenarios that are “not predictions of what is most likely to happen, but rather estimates of worst-case scenarios however unlikely they may be.” Those scenarios include a 33 percent fall in house prices.

“While it would not be appropriate for me to provide details of confidential discussions at cabinet, I can confirm that in the course of my presentation I did refer to Bank analysis of the wide range of potential outcomes that could occur in a no-deal and no-transition,” Carney said. “This analysis included worst case or ‘stress’ scenarios which contained material adjustments to U.K. asset prices.”

The BOE has also agreed to provide U.K. lawmakers with an analysis of the withdrawal agreement with the EU, “including in a ’no deal no transition’ scenario,” Carney said.

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Zoe Schneeweiss

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