November 28, 2018

BoE published its analysis of how leaving the EU would affect its ability to deliver its objectives for monetary and financial stability, as requested by the House of Commons Treasury Committee. PRA also issued a direction stating that a notification must be made by submitting the Temporary Permission Notification Form using the Connect system. The notification must contain the information required by that form and must be made from January 07, 2019 to March 28, 2019. This direction is given by PRA under regulation 14(2) of the European Economic Area Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018.

The BoE report analyzes the economic effects of the Withdrawal Agreement and the Political Declaration, presents framework for the future relationship between EU and UK, and describes the consequences of leaving EU without a Withdrawal Agreement. This analysis includes scenarios, not forecasts. The Monetary Policy Committee (MPC) and Financial Policy Committee (FPC) have reviewed the relevant scenarios, which will be used as inputs in policy deliberations.

Building the scenarios requires making key assumptions about the form of the new relationship between UK and EU, the degree of preparedness across firms, critical infrastructure, and how macro policies respond. The scenarios are only calculated for the policy relevant timelines of the committees—up to five years. Therefore, these scenarios are not assessments of the relative long-term merits of different trading relationships. The degree of uncertainty around any forecast would be greater than the ranges provided in the report, given the usual uncertainty around other key influences on the outlook, such as shocks from the world economy, commodity prices, financial conditions, and confidence. However, the scenarios are informative about the relative economic impact of various economic relationships and transitions to them. 

 

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Keywords: Europe, EU, UK, Banking, Brexit, EU Withdrawal Scenarios, Financial Stability, PRA, BoE

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