Bank of England Carney Defends Pre-Brexit Vote Forecasts
The FTSE 100 faltered in midday trading for the first time this week but recently erased losses and was trading at 6,696.63, 0.21% up.
The London benchmark index stumbled as Bank of England Governor Mark Carney gave testimony on the Financial Stability Report before parliament's Treasury Select Committee, a cross-party group of lawmakers charged with overseeing financial matters.
Carney today denied that the central bank had undermined its independence in the runup to the June 23 Brexit referendum by publishing the risks associated with a decision to leave the European Union.
Two former U.K. finance ministers and politicians accused the Bank of England of publishing "phony forecasts" in collusion with Chancellor of the Exchequer George Osborne.
Carney has continually denied the allegations and today agreed to make available notes from private conversations with Osborne to the committee. He said he was wary of setting a precedent and would not want to limit the free flow of communication between the governor and the chancellor.
"I have discussions with the chancellor of the exchequer on a wider range of economic and financial matters. But the views of the FPC are the views of the FPC; they are not predetermined. They are based on robust discussions," Carney told the committee.
Members of parliament, however, complimented Carney's actions during the aftermath of the Brexit vote, to which he replied "any port in a storm," which was perhaps a jibe at the political antics following the vote.
The testimony came after minutes from the central bank's most recent Financial Policy Committee Meeting were released. The minutes warned of the risks posed by open-ended commercial real estate funds.
During the testimony, Carney said that the bank had flagged the risks in 2015 and made the Financial Conduct authority aware.
He said there was "a trend to create funds that have daily liquidity but are investing in illiquid assets," adding that commercial property was the most extreme case of this.
Carney was questioned extensively on the decision to lower the counter-cyclical buffer to 0%, which will allow banks to continue lending.
"It is part of a series of measures ...that will provide the right type of response," he said, adding that it is less likely U.K. banks will start constraining now but they may become more risk averse if there is continued financial turmoil.
Carney said the U.K. exposure to the faltering Italian banks but that eurozone contagion could be more of an issue.