Mark Carney: Europe is at greater financial risk from Brexit transition than the UK

Posted On: 
11th January 2017

EU nations face a greater risk to financial stability from Brexit than the UK, according to the governor of the Bank of England. 

Mark Carney appearing before the Treasury Select Committee today
Credit: 
BBC Parliament

Mark Carney told MPs that the “immediate risks” to the British economy since the referendum result have “gone down”.

The Canadian has come under fire from eurosceptics for his pre-referendum warnings that a Leave vote would have a “negative impact” in the short term and increase the risk of a recession.

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The Bank’s chief economist, Andrew Haldane, said overly pessimistic warnings ahead of the vote had undermined the credibility of economic forecasting.

Mr Carney himself has also come in for personal attacks from some Brexiteers, with Brexit campaigner Michael Gove accusing him of “arrogance”.

‘MAKING THE WEATHER’

Appearing before the Treasury Select Committee this afternoon, Mr Carney argued that the Bank’s own actions had helped stave off the immediate impact of the referendum result.

“With respect to financial stability risks around the referendum I do think we helped to make the weather – meteorologist help predict the weather, we help to make the weather - in that we catalysed contingency plans, actions, pre-positioning of collateral, other steps with major central banks and actual better risk management which helped ensure this was a smooth process and put the country in a better place to take advantage of the opportunity,” he said.

“Having got through the night, if you will, and the day after, the scale of the immediate risks around Brexit have gone down for the UK. Now, the process can amplify, there are smoother and more orderly ways to have that process,” he added.

RISK TO THE EU

Mr Carney argued that, in his view, European nations have more to fear in the short term from the Brexit process than the UK does.

“I think that the financial stability risk around that process are greater on the continent than they are for the UK,” he said.

“I’m not saying there are not financial stability risks to the UK, and there are economic risks to the UK, but there are greater financial stability risks on the continent in the short term for the transition than there are for the UK."

‘MICHAEL FISH MOMENT’

He also offered a gentle rebuke to Mr Haldane, who suggested last week that forecasters faced a “Michael Fish moment” after failing to foresee the 2008 financial crisis and overstating the short-term impact of Brexit on the British economy.

“One of the advantages of banishing groupthink is one doesn’t always agree with everything that’s said by colleagues,” Mr Carney said.

At the same time he suggested that Mr Haldane had a valid point about the 2008 crash.

“I think the core point Andrew Haldane made, or tried to make, pertains exactly to what we’re talking about today, which is the ability to identity risk to financial stability and the poor performance of most in the economic profession, including some of the major public institutions, including the Bank of England, in identifying the major risk prior to the crisis."