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Leaving is the UK's biggest risk, warns Mark Carney

By Staff Reporter

Published 09/03/2016

Leaving the EU is the "biggest domestic risk" Britain faces and could have serious consequences for the housing market and City of London, the governor of the Bank of England has warned.

Giving evidence to MPs, Mark Carney said a Brexit would trigger a period of financial instability that could last a "very long time" and warned that some firms were likely to move their headquarters abroad.

Under tough questioning from Treasury Select Committee members, Mr Carney stressed that the bank was not making any formal recommendation on how people should vote in the June 23 referendum.

He also flatly denied that he had been pushed by Downing Street into making a grim assessment of the potential fallout.

Mr Carney said the UK leaving was not currently the "median" expectation of financial players, and highlighted effects such as a drop in the value of the pound.

"The issue is the biggest domestic risk to financial stability, because in part of the issues around uncertainty," Mr Carney told the committee.

"But also because it has the potential - depending on how it is prosecuted and how these issues can be addressed - to amplify the risks around the current account as has been discussed, potential risks around housing, potential risks around market function which we are trying to mitigate. And also associated risks with respect to the euro area.

"It is the biggest domestic risk to financial stability. I would say that in my judgment the global risks, including from China, are bigger than the domestic risks."

Mr Carney declined to repeat the language of a G20 statement last month, which said leaving the EU would result in a "profound economic shock".

In the event of a vote for Brexit, Mr Carney said the bank "will do everything in our power to discharge our responsibility to achieve monetary stability and financial stability".

But he added that he could not "provide a blanket assurance that there would not be issues in the short term with respect to financial stability".

Belfast Telegraph

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