BoE says no-deal Brexit now unlikely

The Bank of England is ending its “enhanced monitoring” of liquidity risks at systemic banks and major investment firms, after the UK parliament passed legislation confirming a Brexit deal on January 22.

The bill must still receive royal assent, the final stage of its passage, but it is now almost certain to become law. As the legislation confirms the UK will abide by its withdrawal agreement with the European Union, the BoE says the risk of a no-deal Brexit “now appears very low”.

As such, firms will no longer be expected to report additional detail on their liquidity positions, say BoE executive directors Sarah Breeden and David Bailey in a letter to chief financial officers.

The Prudential Regulation Authority had been concerned that a no-deal Brexit could have caused market volatility and placed unusually high strains on firms’ liquidity.

Breeden and Bailey stress firms must continue to meet their other “business as usual obligations”, including firm-specific buffers. They “should continue to assess, manage and mitigate risks arising from the UK’s withdrawal from the European Union on an ongoing basis”.

Though liquidity risks have receded, Breeden and Bailey say firms should “remain mindful” of operational risks that may arise around Brexit.