BOE Warns Risks to Financial Stability Elevated

        By Jason Douglas
        LONDON--The Bank of England said Thursday that risks to the stability of the U.K. financial system remain elevated, citing threats ranging from Greece's debt troubles to diverging central-bank policies.
        The BOE's Financial Policy Committee, which safeguards the stability of the financial system, made no new policy recommendations at its quarterly meeting that ended March 24, the BOE said Thursday.
        But the panel highlighted a slate of issues in the world economy and global financial system that it is monitoring closely.
        Among officials' top concerns is the risk that participants in financial markets are too sanguine about their ability to quickly sell assets if economic news sours, a fragility the BOE has been highlighting for some time.
        This drying-up of market liquidity risks heightening volatility in financial markets and could undermine financial-sector stability, the panel said.
        The committee instructed BOE staff and U.K. regulators to work together to get a better grasp of which markets may be especially vulnerable and to find out what strategies asset managers have in place to manage their liquidity needs. It asked officials to prepare an interim report on the risks surrounding market liquidity by June and a full report by September.
        The panel also highlighted potential risks to the financial system from a slowdown in the Chinese economy and from the U.K.'s yawning current account deficit, which has widened to around 6% of annual gross domestic product.
        And officials said they are monitoring lending standards closely, particularly in the leveraged loan market, where banks lend to companies before selling on the debt to investors.
        (END) Dow Jones Newswires

        March 26, 2015 05:57 ET (09:57 GMT)

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