The Bank of England said some market and economic volatility can be expected after the U.K.'s surprise decision to leave the European Union.
In the referendum held on June 23, 52 percent Britons voted to leave the EU. UK Prime Minister David Cameron announced his resignation earlier on Friday.
"Some market and economic volatility can be expected as this process unfolds," Governor Mark Carney said in a statement. "But we are well prepared for this."
The Treasury and the Bank of England have engaged in extensive contingency planning and have put in place such measures, Carney said.
"The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward," he added.
"These adjustments will be supported by a resilient UK financial system – one that the Bank of England has consistently strengthened over the last seven years."
The capital requirements of the U.K.'s largest banks are now ten times higher than before the crisis, the BoE Governor noted. The central bank stress tested them against scenarios more severe than the country currently faces, he added.
Hence, UK banks have raised over GBP 130 billion of capital, and have more than GBP 600 billion of high quality liquid assets, Carney noted.
This substantial capital and huge liquidity gives banks the flexibility they need to continue to lend to UK businesses and households, even during challenging times, he said.
The central bank stands ready to provide more than GBP 250 billion of additional funds through its normal facilities. The Bank of England is also able to provide substantial liquidity in foreign currency, if required, Carney said.
"In the coming weeks, the Bank will assess economic conditions and will consider any additional policy responses," the BoE Chief said.
"The Bank will continue to consult and cooperate with all relevant domestic and international authorities to ensure that the UK financial system can absorb any stresses and can concentrate on serving the real economy."
Carney asserted that the U.K. economy will adjust to new trading relationships that will be put in place over time.
It is these public and private decisions that will determine the UK's long-term economic prospects, he said.
by RTT Staff Writer
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