Bank of England takes steps as Brexit risks appear, pound falls
By David Milliken and Huw Jones
LONDON (Reuters) - The Bank of England took steps on Tuesday to ensure British banks keep lending as the financial consequences of the country's decision to leave the European Union began to materialize, especially in commercial real estate.
Sterling hit a fresh 31-year low against the dollar after three big investment firms halted trading in real estate funds, reflecting fears of a Brexit hit to the property market.
There were other signs of how the fallout from the referendum was hitting the economy. Business confidence plunged after the vote, a survey showed, and retailer John Lewis said its sales grew more slowly last week.
The BoE, which is trying to cushion the economy from the June 23 referendum result, said it would lower the amount of capital banks must hold in reserve, freeing up an extra 150 billion pounds ($196 billion) for lending.
Governor Mark Carney recalled the central bank's warnings in March that the referendum was the biggest near-term domestic risk to financial stability. "Some of those risks have begun to crystallize," he said.
Separately, finance minister George Osborne met the heads of top banks and they issued a joint statement afterwards to say the lenders would free up more capital for lending.
The BoE's move represented a reversal of a decision it took earlier this year, when it started tightening the screws on lenders because the economy had appeared set for more growth.
"It means that three quarters of UK banks, accounting for 90 percent of the stock of UK lending, will immediately have greater flexibility to supply credit to UK households and firms," Carney said. Continued...