In its most recent assessment of the stability of the UK financial system, the central bank’s Financial Policy Committee (FPC) found risks to the economy remained “elevated” despite some improvements to the short-term outlook.
Increasing debt levels in China, vulnerable sovereign debt positions in Euro-area countries and greater uncertainty for global trade and financial integration were all notable risks to the global economy, the FPC said.
At home it found UK household debt, already high by historical standards, was on the rise and consumer credit had grown rapidly.
Policy uncertainty was an increased risk, the FPC said, adding: “The high degree of uncertainty in many advanced economies appears not to be fully reflected in asset prices, which have risen sharply in recent months, or in measures of market volatility, which remain subdued.”
The risk posed to UK financial stability by Brexit would depend on the “orderliness of the adjustment to the new relationship” between the UK and the EU, the FPC said.
It added there would be contingency plans in place to manage potential risks as talks get underway from Wednesday.
