Bank Scenario Not An ‘Exam Crisis’, Says BoE Governor Mark Carney

Photo by Bank of England from Flickr

Mark Carney, the governor of the Bank of England, dismissed his critics in front of an audience of MPs on Tuesday morning after he insisted that his latest doomsday scenario was not an “exam crisis.”

The Threadneedle street boss stated that the criticism of the decision of the Bank to release a report on a worst-case scenario was “entirely unfair.” The said report warned that the pound could decline by a quarter in the event of a “disorderly Brexit.”

Carney stated: “There’s no exam crisis. We didn’t just stay up all night and write a letter to the Treasury Committee. You asked for something that we had, and we brought it and we gave it to you.”

In his evidence that was presented to the Parliament’s Treasury Committee on Tuesday morning, Carney also emphasised that the scenario “is not the most likely thing to happen.”

He stated: “Tail risk is tail risk.” He added that it was “low probability that all these risks would happen at the same time.”

The BoE Governor continued: “If people take one thing away from the core of this analysis, and the follow-on consequence analysis, the core of the financial system is resilient and ready for Brexit whatever form it takes..then that is what we want.”

Jon Cunliffe, the Deputy governor, also put down the suggestion of the United Kingdom taking the Norway model. He stated that the decision to join the European Economic Area (EEA) would be “quite uncomfortable” for the City.

He said that the financial system of the United Kingdom is “20 times bigger than Norway, it’s much more complex.”

In the disorderly no-deal scenario that was set forward by the Bank, Carney also disclosed that shopping bills could increase by 10 percent. He stated: “In the most extreme scenario, to give an outer bound, on average your shopping bill goes up by 10 per cent because we have a 25 per cent [sterling] depreciation…If you go to a more orderly scenario transition it’s something around six per cent range. For individual food products, it’s going to vary. But what people will do is that if the price of something goes up more than something else they will switch products.”

The defensive comments that were released by Carney come after various pro-Brexit critics came forward last week to dismiss the report of the Boe and of Carney, with MP Jacob Rees-Mogg stating that Carney was “a second-tier Canadian politician.”