While U.K. households, businesses and banks appeared to be in good shape, the BoE report said, Britain's financial sector faced risks that were 'particularly relevant' given the openness of the U.K. economy.
While U.K. households, businesses and banks appeared to be in good shape, the BoE report said, Britain's financial sector faced risks that were "particularly relevant" given the openness of the U.K. economy."Uncertainty around, and risks to, the outlook have increased," the report said.
"A reduction in the degree of international policy cooperation could hinder progress by authorities in improving the resilience of the financial system and its ability to absorb future shocks," the BoE said in a half-yearly report on the financial system. While U.K. households, businesses and banks appeared to be in good shape, the BoE report said, Britain's financial sector faced risks that were "particularly relevant" given the openness of the U.K. economy."Uncertainty around, and risks to, the outlook have increased," the report said.
But he said there were choices about how to apply rules and he said the BoE's announcement on Friday that it would conduct full tests on the health of U.K. banks once every two years, and no longer annually, was an example of how to help competitiveness in the sector.The BoE said it continued to judge that valuations and risk premia in financial markets were "vulnerable to a sharp correction" due to the risks to growth and inflation and uncertainty about interest rates.
But it said non-bank financial institutions such as hedge funds remained vulnerable to a sudden financial shock and might have to undertake a fire sale of assets such as British corporate bonds in this scenario.
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