Request a call back

Banks bear the brunt from UK

Assets of the largest banks lost 30% of their cost after the Brexit referendum.


The main anxiety is the anxiety connected with a collapse of the pound and following consequences for the UK's ability to make borrowings and serve the current debt. It is connected both with the government and the banking sector with all clients.


Some days have passed after HSBC had released the new data with approved rate below the 1%. There are concerns that downward pressure on inflation level and outflow of capital from the country may cause a growth of interest rates on different debts and lowering of available volume of credits. British companies of construction sector suffer significant losses.


Results of the referendum will cause a growth of concerns over British economy and labour market. However, even excluding these factors, the assets of the European banking system lose their cost. At the moment, the main investments and commercial banks in Germany, France, and Switzerland have lost 20%.


Investors are afraid that the referendum and further uncertainty will lead to a collapse of operations both in trading and consulting and investment services which have already a hard year. At that time, some large banks faced the referendum during a high-cost restructure.


There is no definiteness of what to expect for banking system in London's City. Certainly, each variant of the exit from the EU can cause a worsening of financial business in London. Though it needs some time, a process will cause a massive spending and a serious destabilisation. 


However, the situation should not be considered the same as in 2008. The BOE and the ECB are on the stage of massive programmes to support liquidity, and the banking system has too many safe assets with a high demand. BOE's Governor Mark Carney said that volumes of asset-capital of financial institutions exceed for ten times the same volumes before the last crisis.


Moreover, the banks do not have such a significant volume of difficult structural debt. The banking system is stable and secured from a negative impact. This show why speculators who always wait for the better price for buying securities started buying these assets after some stabilisation of economy. The situation is quite difficult and it is hard to forecast a development, but it is far from the existential crisis.