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The Bank of England: Systemic risk management

The Bank of England has historically been the most respected financial institution in Britain. Its status was enhanced when new Chancellor Gordon Brown made the bank independent of the government immediately after Labour's historic 1997 general election victory. Mark Carney, the current Governor of the Bank of England, is in the unique position of having previously served as governor of the Bank of Canada and having contributed to protecting Canada from the most dire effects of the 2008 Global financial crisis. Currently Mr. Carney also serves as the chairman of the G20 Financial Stability Board.


Although the Bank of England is an entirely nonpolitical organization its responsibility is to ensure Britain's long-term financial stability by a judicious management of the financial and systemic risks it faces. For these reasons Mr. Carney has repeatedly stated both in front of the Westminster’s Commons Treasury and Monetary Policy committees as well as before the media that the Brexit referendum represents the “biggest domestic risk to financial stability” and implicitly agreed with a recent G20 statement that a UK vote to leave the EU is likely to result in a “profound economic shock” for Britain. Previously Mr. Carney has gone on record as stating that membership of the EU had been beneficial for UK's financial sector by enhancing Britain’s dynamism and that overall membership of the EU “magnifies” Britain's influence over global financial regulations. In addition he went on record explicitly supporting Prime Minister Cameron’s renegotiated terms for the UK’s membership in the EU by arguing that:

 “The settlement explicitly recognises the needs of the UK to supervise its financial stability, while not impeding the implementation of necessary, further integration among members of the euro area… It recognises that there is more than one currency in the EU and makes a legally binding commitment to ensure non-discrimination in the single market on the basis of currency.”

 Inevitably, Governor Carney’s unambiguous statements in favor of the UK remaining in the EU and his warnings of the consequences on the British pound and financial sector in general of Britain leaving the EU have attracted scathing rebukes from leading ‘leave’ camp members. For example former Chancellor Lord Lawson accused Governor Carney of having ‘debased himself’ by taking sides in the Brexit referendum and by siding with the government for purely personal reasons. Mr. Carney defended himself of such attacks by stating that “I am not going to let that stand” and denying he had been unduly influenced by the Prime Minister: “It is my signature on the letter; these are my views”. His position was defended by a range of financial analysts such as Ranko Berich of foreign exchange company Monex, who said that Mr. Carney had

“…waded into the Brexit debate and emerged unscathed, defending the integrity of the Bank of England from accusations of bias from lawmakers, while highlighting the risks of the Brexit”.

The personal nature of the attacks against Governor Carney are proof of his credibility with the financial markets and British businesses in general and off the important impact that his comments an his position on Brexit is likely to have on significant portions of the City of London and of the country as a whole.