Cardiff Business School - Breakfast Briefing with Jonathan Hall from the Bank of England Financial Policy Committee
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Building Financial Market Resilience
The Bank of England Financial Policy Committee (“FPC”) exists to ensure that the UK financial system can serve UK households and businesses during the good and the bad times, reducing the likelihood that external shocks are amplified.
The economic impact of the Covid-19 pandemic was just such an external shock. And while the UK financial system has so far been able to provide the necessary support, some vulnerabilities have been exposed. Indeed, actions by market participants that may have been rational when considered in isolation, led to systemic issues when considered in aggregate. Without extraordinary Central Bank actions those financial market vulnerabilities would have amplified the external shock and worsened conditions for households and businesses.
Supported by an analysis of market dynamics, the speech will argue that a number of financial market nodes of vulnerability were jointly responsible for the contemporaneous market dysfunction and tightening of conditions in March 2020. And without policy action, similar dynamics could be seen in the future with both the ongoing fragility of bond markets and the dangers of leverage becoming evident in recent weeks.
Jon will suggest potential policy actions to address the highlighted vulnerabilities and discuss ongoing work, both within the bank and globally, to assess and ensure the resilience of core markets.
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