And it also made clear that in the event of such a shock crystallising, it would be prepared to release the countercyclical capital buffer (CCyB).25 In short we have acted to make sure the system is resilient to a worst case major economic shock from Brexit. That does not mean losses would be avoided. Or that it would be without volatility: financial stability does not mean market stability. But it does mean that the financial system would not contribute to and amplify the shock, and would be able to continue to provide critical economic services to the economy. 25  The CCyB is one of the major new regulatory tools introduced after the crisis – allowing regulators to vary system-wide bank capital requirements over time. Bank of England (2016) sets out the FPC’s approach to setting the CCyB. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  It would of course be very valuable to know how markets and investors have formed their expectations of a Brexit outcome and its consequences and how big a correction in any direction might occur if those expectations were not met. But I am not sure it would have changed much how we have acted over the past 18 months. Brexit apart, the risks facing the UK from a correction of the financial cycle are less obvious and more difficult to assess. The overall level of debt in the economy is high by historical and international standards.
Such an outcome may not be what we expect to happen or what is likely to happen but rather the worst possible case. The risk has not been generated by the financial sector. But, if it occurred, it would almost certainly lead to a correction in UK asset prices and losses for UK banks. The task of the FPC has been to ensure that such a correction, were it to occur, would not lead to a UK financial crisis. We have tested the banking system to equal and greater stresses to give us the confidence that while losses would occur, unlike 10 years ago, the system would have the capital to absorb them. We have required the banks to hold liquidity, in the currencies that they would need, to withstand a liquidity stress greater than that experienced in the financial crisis. And the Bank stands ready to provide liquidity in all major currencies. And, with other UK authorities, we have ensured that regardless of the Brexit outcome there should not be disruption to the provision of financial services in the UK by EU firms. The Financial Stability Reports of the FPC over the past 18 months have set out the actions that have been taken. The Record of the Financial Policy Committee’s February meeting, published earlier this week, makes clear the Committee’s assessment that the core of the UK financial system is resilient to, and prepared for, the wide range of risks it could face, including a worst case disorderly Brexit.