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UK banking faces "outsize" risks from loss of EU markets: Carney

Bank of England Governor Mark Carney said Britain's giant financial services industry could suffer "outsize" consequences from losing only some of its access to markets in the European Union when the country leaves the bloc.

Carney said he agreed with comments made this week by a senior banker who compared the City of London with the game of Jenga which involves players trying to avoid the collapse of a tower of wooden blocks as they remove the pieces one by one.

Carney, speaking in a question-and-answer session with lawmakers in parliament on Wednesday, said the scale of Britain's financial services industry had made it self-reinforcing over recent decades.


"At some point, losing elements of that has outsized, could have outsized effects, and these are some of the judgments that the government will have to make," he said.

Financial services account for about a tenth of British economic output.

Carney reiterated his view that Britain would need a transition period to smooth its exit from the EU.

Britain's banking sector is considered one of the biggest potential losers from Brexit if the country is unable to maintain its access to markets in the bloc after Brexit.

Industry officials said on Tuesday that tens of thousands of jobs in Britain's financial services sector could be lost if euro clearing shifts to continental Europe and full access to the bloc's single market is not continued.

Carney also said on Wednesday that Britain's planned exit from the EU poses more short-term risks for the financial system in continental Europe than in Britain because of the importance of the British financial services industry for the region.

"I think that the financial stability risks around that process are greater on the continent than they are for the UK," Carney said.

"I'm not saying there are not financial stability risks to the UK, and there are economic risks to the UK. But there are greater financial stability risks on the continent in the short term, for the transition, than there are for the UK."