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“We have put the banks through the wringer well in advance,” Carney told the BBC’s Today program on Friday, referring to stress tests that he said would ensure the banks “are there to lend to the economy” and “advance instead of retreat.”
“The U.K. financial system has tripled the amount of capital they had over the course of the last several years, they have increased the amount of liquidity by 10 times” in order to be “in a position to withstand a shock, wherever the shock comes from,” including a no-deal Brexit scenario, Carney said.
The worst-case scenario banks were tested on — which Carney stressed was not a prediction but preparation — involved “real-estate prices going down by more than a third, interest rates going up by almost 4 percentage points, unemployment rising to 9 percent, and the economy going into a 4 percent recession.”
“The financial system will be ready for that undesirable and still unlikely possibility,” Carney said, adding that a few outstanding financial issues “that cut across borders” and can’t be solved by the banks alone are being addressed by European authorities and the U.K. government. [...]