The Bank of England says Brexit still poses ‘material risks’ to financial stability

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The Bank of England (BOE) has warned that Brexit still poses "material risks" to financial systems in both the U.K. and EU.

A statement released Friday has summarized conclusions from the bank's most recent meeting of its Financial Policy Committee (FPC), a body designed to spot any potential disruption to the U.K.'s financial stability.

The FPC noted that "material risks remain, particularly in areas where actions would be needed by both the U.K. and EU authorities."

The BOE said such areas included the processing of outstanding cross-border contracts. It identified uncleared derivative contracts between Britain and European Union (EU) parties with a notional value of £26 trillion ($36 trillion). A further £70 trillion of cleared contracts is seen as a particular risk to the EU.

"Cleared" trades are trades that take place on an exchange while "uncleared" trades take place between two counterparties directly. A derivative is a security with a price that is dependent upon, or derived from, one or more underlying assets.

Insurance risk

Another risk area highlighted by the bank committee is insurance. It said major insurers may not be able to pay claims or receive premiums from policyholders in the opposing jurisdiction.

It is estimated that around 50 million people could be affected with liability values totaling £83 billion.

Despite noting that major U.K. banks are adequately capitalized to cope with a disorderly Brexit, the FPC is to carry out another round of stress tests in 2018.

The scenario, which includes a 33 percent fall in house prices and interest rates rising to 4 percent, is the same as in 2017.

The United Kingdom is scheduled to leave the European Union at 11 p.m. London time on 29 March 2019.