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10/28/2016, 12:43 PM (Source: TeleTrader)
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Lane: Confidence in EU at risk from Brexit talks

If the upcoming negotiations on the British departure from the European Union become perceived as moving towards "a more severe form," consumer and investment confidence throughout the continent could be damaged, according to Philip Lane, member of the European Central Bank's Governing Council. In remarks for a speech in London on Friday, the policymaker said despite "relatively orderly" reaction in the markets since the Brexit vote in June, the start of the divorce process poses a special risk. Lane, also the governor of the Central Bank of Ireland, stated an impact from a disturbance would probably be "asymmetric, in view of the relative size of the U.K. and EU economies."

He suggested financial activity's shift from London to the monetary union could involve several locations as the Eurosystem is decentralized. "If the U.K.-EU negotiations deliver an agreement that effectively preserves the single passport for U.K.-resident entities selling into the EU, the net impact of Brexit on the structure of the European financial system might be quite minor. However, in scenarios in which U.K.-resident firms are no longer treated as equivalent to EU firms for regulatory purposes, it is likely that significant migration of financial activity from the UK to the EU will occur," the rate-setter pointed out.

Lane noted investors expect the ECB's asset purchase scheme to be continued beyond the current end-date, set for March.

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