Central Bankers Around The Globle Scramble To Defend Markets: BOE Pledges $345BN; ECB, Others Promise Liquidity

Tyler Durden's picture

There was a reason why we warned readers two days ago that "The World's Central Bankers Are Gathering At The BIS' Basel Tower Ahead Of The Brexit Result": simply enough, it was to facilitate an immediate response when a worst-cased Brexit vote hit. And that is precisely what has happened today in the aftermath of the historic British decision to exit the EU.

It started, as one would expect, with Mark Carney who said the Bank of England is ready to pump billions of pounds into the financial system as he stands at the front line of Britain’s defense against a Brexit-provoked market crisis. The BOE governor declared that the central bank can provide an extra 250 billion pounds ($345 billion) through its existing facilities. It also has further measures if needed to deal with what he described as a “period of uncertainty and adjustment” after Britons voted to end their 43-year membership of the world’s largest single market.

The pound plunged to a three-decade low, British and global stocks tumbled and European bond spreads widened as the Brexit vote unfolded on Friday. Investor bets on a July interest-rate cut rose and Standard & Poor’s said the U.K. will lose its top credit rating.

Some market and economic volatility can be expected as this process unfolds,” Carney said in a televised statement in London after the referendum result. His comments followed Prime Minister David Cameron’s announcement that he will step down this year, which will inject political uncertainty into an already volatile period. His full announcement is below and his statement can be found here:

 

More from the central bank governor who is now scrambling to undo all the scaremongering he had unleashed to prevent precisely this outcome:

But we are well prepared for this.  The Treasury and the Bank of England have engaged in extensive contingency planning and the Chancellor and I have been in close contact, including through the night and this morning. The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward.

These adjustments will be supported by a resilient UK financial system – one that the Bank of England has consistently strengthened over the last seven years. The capital requirements of our largest banks are now ten times higher than before the crisis.
 
The Bank of England has stress tested them against scenarios more severe than the country currently faces. As a result of these actions, UK banks have raised over £130bn of capital, and now have more than £600bn of high quality liquid assets.

* * *

In the coming weeks, the Bank will assess economic conditions and will consider any additional policy responses.

* * *

A few months ago, the Bank judged that the risks around the referendum were the most significant, near-term domestic risks to financial stability.
 
To mitigate them, the Bank of England has put in place extensive contingency plans.
 
These begin with ensuring that the core of our financial system is well-capitalised, liquid and strong. This resilience is backed up by the Bank of England's liquidity facilities in sterling and foreign currencies.

 

All these resources will support orderly market functioning in the face of any short-term volatility.  The Bank will continue to consult and cooperate with all relevant domestic and international authorities to ensure that the UK financial system can absorb any stresses and can concentrate on serving the real economy.

 

That economy will adjust to new trading relationships that will be put in place over time.  It is these public and private decisions that will determine the UK's long-term economic prospects.

 

The best contribution of the Bank of England to this process is to continue to pursue relentlessly our responsibilities for monetary and financial stability. These are unchanged.
 
We have taken all the necessary steps to prepare for today's events. In the future we will not hesitate to take any additional measures required to meet our responsibilities as the United Kingdom moves forward.

As Bloomberg adds, The BOE has been preparing for more than a year to deal with this outcome and Carney will now have to rely on that crisis playbook to stem panic in financial markets. With the result announced on a normal trading day, the immediate threats of Brexit could include investors dumping U.K. assets and a drying up of bank funding. 

The BOE “has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks,” it said in a statement early Friday. “The Bank of England will take all necessary steps to meet its responsibilities for monetary and financial stability.”

Bank of Japan Governor Haruhiko Kuroda said on Friday that central banks will do their utmost to provide liquidity. Central banks around the world have been on high alert, and the chiefs of the Fed, BOJ, the Bank of Canada and the Swiss National Bank cited the referendum as being potentially disruptive.

As well as intensive supervision to ensure banks had enough cash ahead of the vote, BOE plans include additional funding operations and activation of swap lines with other central banks to help firms access overseas currencies. It also has a number of other “stability measures” available, though policy makers haven’t provided details in advance.

What happens next depends on how markets play out . At the time of the Scottish independence referendum in 2014 - where a potential splintering of the U.K. was averted - the BOE’s Financial Policy Committee emphasized readiness to “take steps rapidly” if needed.

So far, after both stocks and FX plummeted, there has been a modest rebound from historic lows, which saw the British pound drop to 31 year lows as risk assets already start to anticipate concrete action. The BOE has already added extra auctions this month to make funds available to lenders. It could cut its key interest rate to as low as zero from 0.5 percent, perhaps immediately, analysts at ING Bank NV said in a note to clients. Traders are now pricing in a more than 50 percent chance that the BOE will cut borrowing costs by its July meeting.

Beyond the immediate market ructions, there are longer-term policy issues. While Carney’s view was that the next BOE interest-rate move is “more likely to be up than down,” that was conditioned on a “Remain” decision. Recent signs have pointed to an economic slowdown, and the possible consequences of Brexit may include a spike in inflation, a rise in unemployment and even a recession. The BOE potentially faces what Carney has described as a “challenging trade off” between supporting growth and employment and stabilizing inflation.

The central bank has cited the U.K.’s record current-account deficit as a potential vulnerability, saying “an abrupt decline in capital inflows could pose a major financing difficulty.” Data in March showed the difference between money coming into the U.K. and money sent out widened to 32.7 billion pounds ($43.3 billion) in the fourth quarter. That equates to 7 percent of GDP, the most since records began in 1955.

* * *

It wasn't just Carney.  Central banks across the world shifted into crisis-management mode, as the U.K.’s vote to leave the European Union tipped markets into turmoil and cast a pall over the already-weak outlook for global growth.

Officials in London, Frankfurt and Zurich are having to take the baton in the efforts to control the turmoil from Asian central banks, where the Bank of Japan reiterated its readiness earlier on Friday to intervene to hold down the yen, as investors sought refuge from plunging asset prices in Europe. Beyond the initial gyrations, central banks will face questions over how they can support growth and hit inflation targets at a time when policy instruments are already stretched.

Bank of Japan Governor Haruhiko Kuroda and Japan’s Finance Minister Taro Aso, whose country currently heads the Group of Seven, highlighted that central banks of six major developed nations have currency-swap lines at the ready to provide liquidity. Those lines, among the Japanese, U.S., euro-region, U.K., Swiss and Canadian central banks, were set up during the global financial crisis and made permanent in 2013. G-7 officials will speak by phone some time after midday European time, according to two people familiar with the matter, who declined to be identified because the talks are private.

The swaps will probably be activated, at least in London, Krishna Guha, the vice chairman of Evercore ISI in Washington who previously worked at the Federal Reserve Bank of New York, wrote in a note. “While there will be a G-7 statement and possibility of coordinated international intervention if currency markets become dysfunctional, we think the bar for such joint intervention is high and suspect that we may get unilateral action.”

South Korea and India were among those reported to have intervened in an effort to smooth trading in their currencies, while analysts said Denmark probably did the same and those including Singapore could step in. Kenya’s central bank said it was ready to temper market volatility, while counterparts including Thailand said they were monitoring the situation in their locations.

Eight years after the start of the global credit crisis, the post-Brexit turmoil seemed set to unleash a further wave of monetary easing, potentially including in the U.K. itself. Economists in research notes Friday highlighted that the People’s Bank of China could act, either through intervention to prop up its currency or potentially with a cut in the required reserve ratio for its commercial banks.

The Bank of Japan was already forecast to step up monetary easing at its policy meeting next month, with an historic surge in the yen serving to underscore that call. Aso, the finance chief, told reporters that stability in the foreign-exchange market is very important and that markets have been extremely jittery, with rough moves. He highlighted Japan’s concern about the impact of the Brexit vote on the global economy and said “we will respond properly if needed.”

Then, moments ago, the ECB issued a widely anticipated statement as well. This is what it said in the tersely worded and vague press release:

ECB is closely monitoring financial markets

 

  • European Central Bank is closely monitoring financial markets
  • ECB continues to fulfil its responsibilities to ensure price stability and financial stability in the euro area

 

Following the outcome of the UK referendum, the European Central Bank (ECB) is closely monitoring financial markets and is in close contact with other central banks.

 

The ECB stands ready to provide additional liquidity, if needed, in euro and foreign currencies.

 

The ECB has prepared for this contingency in close contact with the banks that it supervises and considers that the euro area banking system is resilient in terms of capital and liquidity.

 

The ECB will continue to fulfil its responsibilities to ensure price stability and financial stability in the euro area.

But the main question everyone will want answered is what the Fed will do: a Fed who rate hiking cycle is now officially dead, and the question is when the next rate cut, or outright QE will take place.  As Bloomberg notes, for the Federal Reserve, the unsettled markets justified its decision to hold off on raising interest rates this month. U.S. stock-index futures were among those tumbling Friday, and the dollar climbed against all major currencies save the yen. U.S. Treasuries jumped.

“The Fed will want to see the impact from the U.K. vote before considering resuming rate rises so a July move looks very unlikely now,” a Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc. “The dollar, however, is likely to keep gaining across the board as foreign central banks consider rate cuts or FX intervention.”

We expect Yellen to make a statement shortly after, or perhaps before, the market open to do the one thing central banks do so well... perhaps the only thing: stabilize markets.

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JamaicaJim's picture

I bet the skinny shits are an epidemic in Brussels.......

 

Holland, France are soon to follow.

Ha Ha suckers to the EU/Pee U gang of assholes.

Central bankers are today's plague globally...they need to be eradicated from the planet

OldPhart's picture

Do these dumbasses have $200 trillion to stem the derivative market from going to shit?

Thought not.

Every word they say is a lie, and they should be summarily shot for each lie.

jcaz's picture

Yep- $345B is a drop in the bucket in this deal-  they'll eat thru that by the end of the day.......

TeamDepends's picture

Oprah has gained and lost a few trillion pounds. Maybe she could start a school of economics in Britain, girls only of course.

wildbad's picture

wilders, le pen, 5 star, afd, cataluna, bavaria.....

they all see the real possibility that an awakened public can actually excercize democracy and overthrow those greedy , power hungry globalist thieves.

this crack will widen

the light which will shine through will embolden those who have long believed that there is simply no way to fight the system.  the madmen and women who initiated and embarked on this anti-democratic €U project will soon be trying to distance themselves from the pitchfork , tar and feather hoards as well they should.

merkel, hollande, schultz, junker..now people are seeing your real agenda to destroy national sovereinty in lieu of your hidden agenda to consolidate europes free nations under the globalist anti-democratic socialist paradigm.

you will not be spared the wrath born of your duplicity

P Rankmug's picture

We are reaping the result of Economics Gone Wild.

The Dismal Science   http://manonthemargin.com/the-dismal-science/ 

P.S.  Skip the video.  Bernanke and Yellen are a turn off..

 

RattieNomNom's picture

Junker must resign! Merkel must resign!!

Latitude25's picture

Hey BOE doesn't that number look ridiculously low considering CDS exposure?

savedeposit's picture

I do not want to be in a world where "markets" need to be defended by central bankers
Fuck the the central bankers and there "markets"

abyssinian's picture

hahaha in reality $345 billion only can fill few holes! Better start pritning more

onewayticket2's picture

Long Popcorn and nailguns.

A82EBA's picture

Finally, a black swan event that wont fade in 2 weeks

Ungaro's picture

What are you thinking of? I've forgotten... The Black Swan (BS) will come home to roost when the central bankers' phones will be perpetually busy, their email boxes always full and their banksters will have to close shop. As long as these idiots can flood the market with fresh money the markets will weather any storm. 

A82EBA's picture

I'm thinking this could be the start of reversing the progress of the NWO agenda. Finally the 'people taking back their country' movement gaining ground (if only in the UK thus far). I'm hearing a lot of leverage lost in central bankers global coordination with UK (BOE) leaving the monetary rule of the ECB. Ukraine, Syria, Malaysan flights, Swiss Gold Referendum, Scotland referendum all faded but Brexit is concrete with consequences visible and lasting. This is big, not sure why the red arrows

BurningBetty's picture

These people don't seem to understand that THEY ARE THE ONE AND ONLY PROBLEM TO ALL ECONOMICAL AND FINANCIAL ISSUES WE HAVE TODAY! The sooner the world wakes up to this favt the sooner we can abolish every single central bank and their collaborators.

WTFUD's picture

Mervyn King the fat paedo still rules the roost at BIS. Carney the skinny little fuck would look more in place working in a funeral parlour. How come after scaremongering backing Remain is he not resigning?

sawman's picture

Bet those that voted wouldn't give this dick the mandate to spend 350 billion on shoring up the financial system.

DeeZ_nutZ's picture

this fucking piece of thist mark carney along with his goldman buds created the biggest bubble in canadian history and comfortably fucked off.   his should be hanging on the tree!

RawPawg's picture

let's just see what the lifespan of a keystroke is

 

predictions?

vesna's picture

Buffett, How you tend to profit from this one, another bailout MotherFucker?

Arthur Two Sheds Jackson's picture

Congrats to Soros.He'll make a billion today.

Maestro Maestro's picture

 

 

 

Fuck the bankers

 

Fuck the EU

Fuck USA

Fuck ISIS

EU=USA=ISIS=The FED

BurningBetty's picture

Release the Kraken. 

Last of the Middle Class's picture

Damn, so close. One more dead mp would have flipped it! Dipshits should have doubled down on their propaganda.

CoCosAB's picture

The only problem is that they killed her to soon...

In today's news schizophrenia world one week is a very long long long time! No one even remembers today who is Jo Cox...

 

By the way... Who is Jo Cox?!

JailBanksters's picture

Pleges 345 Bills, pfft

Might as well make it a Billion Gazillion Bills because it's just a Cheque with

no money in the Bank, and it won't be in the Bank until who ever gets the cheque  repays the 345 Bills.

 

highwaytoserfdom's picture

 

Banksters and globalist for FEMA camps

 

Lets not forget the Propaganda MSM  FCC controled IsIS   war mongers.....     Snowden come home

http://thefreethoughtproject.com/cheney-murdoch-rothschild-drill-oil-res...

"The Rothschilds, and that class of money-lenders of whom they are the representatives and agents -- men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest -- stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved." by: Lysander Spooner
(1808-1887) Political theorist, activist, abolitionist
Source: "No Treason #6" (1870)

 

south40_dreams's picture

These bastards want blood, YOURS!

PrefabSprout's picture

Another typo in a headline..."Globle", seriously?--okay, I get it, this particular news cycle, today, is brutal...

 

CoCosAB's picture

You don't know Globle?

http://www.globlerealty.com/

They are in serious trouble! Just like the rest of the Globe...

kiss kiss

sudzee's picture

Thank goodness C/B's say they will print whatever it takes. For a minute I thiught they would just call for a BAIL-IN.

yogibear's picture

Screw the central banksters. Their the problem!

Many people would like to see them hanging from light polls.

Phineas J. Whoopie's picture

Hey Carney, Cameron could use some of your liquidity pumped in his ass

Piranha's picture

Carney speaks and sounds like Obama

south40_dreams's picture

Central banks worldwide promise to destroy markets wherever they can be found

frankly scarlet's picture

They just don't get it....its the F'n debt stupid. Mainly the private debt,household and commercial. All the while the banks play at the derivatives casino....Well they took their crap shoot and lost on this one.....of course it is the working classes in Britain that will be made to pay the price through austerity, more taxes less services as the complete opposite direction the govt. should take...tough bit to swallow for the NWO as one of the jewels in their crown exits....

chart_gazer's picture

consider this "shock" took US markets back to prices from 1 month ago. folks (as obumer would say) you have your heads up your ass if you think the most corrupt, secret, lying, manipulative administration ever is going to sit by idle and not manipulate markets back up with every thing they have. the only thing this crook can say to the american people that is good is that he propped the stock market up. he wants to match or beat clintons performance, will not be denied. 

KashNCarry's picture

Two Words:

Printing Press