BOE Sees Fallout on House Prices, Pound From No-Deal Brexit

(Bloomberg) -- The Bank of England said the risks of a no-deal Brexit have increased and warned that such an outcome could slam the pound, government bonds and house prices.

In its Financial Stability Report on Thursday, it said that “significant market volatility and asset price changes are to be expected in a disorderly” withdrawal from the European Union. It also sees a risk of “material economic disruption.”

There’s some good news for big banks: The report says they have the strength to survive a global trade war colliding with a disorderly Brexit. It also said most of the threats of disruption to cross-border banking services because of Brexit have been mitigated, though more action by the EU is needed to fully clear the risks.

The central bank has long highlighted Brexit as a key threat to U.K. financial stability, saying previously that a no-deal scenario could mean “significant market volatility.” The U.K. is due to leave the EU by the end of October, but Parliament is deadlocked and refusing to pass a deal, increasing the odds the country crashes out.

In the buildup to the original Brexit date of March 31, the BOE increased the frequency of its regular liquidity operations and introduced measures to ensure banks could access euro funding.

To contact the reporter on this story: Fergal O'Brien in Zurich at fobrien@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net, Brian Swint

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