The Bank of England will provide an unlimited financial backstop to prevent markets from seizing up and plunging lenders into crisis if Britain votes to leave the European Union.
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Asked whether uncertainties of this kind might lead companies to relocate business activities away from the City in the event of Brexit, Mr Carney said: “One would expect some activity to move”.
Carney said the Bank’s analysis – first outlined in a report published last October – was well grounded, and his discussions with Cameron and the chancellor George Osborne were about the specific issues that affected the Bank’s twin aims of controlling inflation and ensuring financial stability.
Mr Carney was also questioned about the financial sector’s reaction to an exit.
“Particularly welcome” was a recognition that responsibility for the implementation of regulations on financial institutions and markets and macro-prudential responsibilities will remain with the central banks of non-euro states, he said.
He concluded: “Finally, it makes a series of commitments to improve the competitiveness of the European Union economy-commitments, to the extent they are fulfilled, that would reinforce the positive impact of European Union membership on the Bank’s secondary objectives”.
The impact of a “Brexit” on the City of London’s financial district would largely hinge on the basis of Britain’s trading relationship with the EU, Carney said.
Conservative MP Jacob Rees-Mogg criticised Mark Carney for making “speculative” pro-EU claims.
Announcing the extra ILTR operations dates the Bank also moved to assure markets that it would continue to offer liquidity insurance through other facilities too.
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“There could be lower levels of activity because of the degree of uncertainty that could affect investment and household spending”, Carney told a parliamentary committee.
