Facebook's Libra must be 'rock solid' before launch warns BoE's Carney

Cornelia Mascio
Luglio 12, 2019

"I'm committed to be here to have an orderly transition", Carney said in a press conference on Thursday, speaking after the publication of the BOE's latest Financial Stability Report.

Bank of England Governor Mark Carney also warned that Libra would need to be "rock solid" security wise from the very beginning.

"The perceived likelihood of a no-deal Brexit has increased since the start of the year", the report said.

However, the FPC cautioned that significant volatility and asset price changes in markets are to be expected in case of disorderly Brexit.

In the latest report from the Financial Policy Committee (FPC), the Bank said it had assessed lenders against a doomsday no-deal Brexit scenario together with a global slowdown sparked by the US-China trade war and found they would still be able to continue lending to United Kingdom households and businesses.

"Although Mark Carney and his colleagues have offered some reassurance that there are adequate defences are in place to protect against major financial instability, investors should still be prepared for the possibility of big swings in the pound and heightened volatility as we move into the autumn and the October deadline for leaving the European Union".

The U.K. has long relied on foreign investors to finance its yawning current-account deficit, which, at 5.6% of national income in the first quarter, is the widest among comparable major economies. British banks were better prepared for a downturn than they were before the 2008 financial crisis when they held much less capital and required multi-billion-pound bailouts.

Facebook has said that Libra will be fully collateralized by a basket of highly-liquid assets including several fiat currencies and cash-equivalent assets such as high-grade government bonds.

The process to pick a new International Monetary Fund managing director "should be open, transparent and merit-based, so there´ll come a time when that process launches, and that´s probably the right time to answer that question". Banks' ability to withstand liquidity shocks would also be put under the microscope later this year, the BoE said, though it added that it did not intend to tighten liquidity rules.

The central bank's warning comes as the two contenders to succeed Theresa May as prime minister are flirting with the idea of leaving the European Union without agreeing withdrawal terms, an outcome the central bank has warned would likely cause economic disruption.

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