Mark Carney: Bank scenario was not an 'exam crisis'

Sebastian McCarthy
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Mark Carney also expressed concerned that the City would suffer once UK policymakers are ‘outside the room’ where financial rules are written. (Source: Getty)

Bank of England governor Mark Carney rebuffed his critics in front of an audience of MPs this morning after insisting that his recent doomsday scenario was not an “exam crisis”.

The Threadneedle street boss said that criticism of the Bank’s decision to make a report on a worst-case scenario – which warned that the pound could fall by a quarter in the event of a "disorderly Brexit" - was "entirely unfair".

"There’s no exam crisis. We didn’t just stay up all night and write a letter to the Treasury Committee. You asked for something that we had, and we brought it and we gave it to you," he said.

In his evidence to Parliament's Treasury Committee this morning, Carney also insisted that the scenario "is not the most likely thing to happen."

"Tail risk is tail risk," he said, adding that it was "low probability that all these risks would happen at the same time."

Carney added: "If people take one thing away from the core of this analysis, and the follow on consequence analysis, the core of the financial system is resilient and ready for Brexit whatever form it takes..then that is what we want."

Deputy governor Jon Cunliffe also put down the suggestion of Britain taking the Norway model, saying that the decision to join the European Economic Area (EEA) would be “quite uncomfortable” for the City.

Britain’s financial system is “20 times bigger than Norway, it’s much more complex.”

In the disorderly no-deal scenario set forward by the Bank, Carney also said today that shopping bills could rise by 10 per cent: “In the most extreme scenario, to give an outer bound, on average your shopping bill goes up by 10 per cent because we have a 25 per cent [sterling] depreciation...“If you go to a more orderly scenario transition it’s something around six per cent range. For individual food products it’s going to vary. But what people will do is that if the price of something goes up more than something else they will switch products.”

The defensive tone struck by Carney this morning comes after a number of pro-Brexit criticis came forward last week to dismiss the governor and the Bank of England report, with MP Jacob Rees-Mogg saying that Carney was "a second-tier Canadian politician".