Three key takes from the BoE Financial Policy Committee's minutes

Jessica Morris
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The Bank of England remains concerned about the Greek debt crisis (Source: Getty)

The Greek debt crisis, Britain's current account deficit, and the potential impact of climate change were all discussed at the The Bank of England's financial policy committee's (FPC) meeting in March. This is the committee charged with monitoring and taking steps to protect the UK's financial system from systemic risks.

1. Greece situation remains risky:

The Greek debt crisis, which has been rolling on since radical leftist party Syriza was elected in late January, is still concerning risk watchers at the Bank of England.

Athens is currently locked in talks with its creditors as it seeks to have reforms approved in return for a further €7.2bn (£5.3bn) portion of its bailout loan.

"The risks in relation to Greece and its financing needs, including in the near-term, had increased. More generally, there was a risk that low nominal growth in the euro area would exacerbate financing challenges in highly indebted economies."

2. Current account deficit eyed:

Britain's bloated current account deficit, despite shrinking to £25.3bn, down from £27.7bn in the third quarter, still represents the largest deficit since records began in 1948.

"It was noted that there had not been a rapid pick-up in domestic credit growth to date and also that the currency composition of the United Kingdom’s assets and liabilities meant that depreciations of sterling tended to improve the net international investment position and vice versa," according to the minutes.

"Moreover, to the extent that fiscal policy was credible and investors were confident in the monetary and fiscal policy frameworks and the United Kingdom’s continuing openness, current account deficits would be easier to finance."

"That said, the current account deficit was large and could, in adverse circumstances, trigger a deterioration in market sentiment towards the United Kingdom."

3. As well as climate change:

The Bank of England has been asked by the government to investigate risks posed by environmental health to the financial system. This involves two scenarios: "a catastrophic weather-related events linked to the possibility of rising global temperatures" and the speed of the transition to a low-carbon economy which could cause share energy price hikes.

The Financial Policy Committee has said that the broad economic impact of climate change, and any consequent financial risks, are beyond its typical policy timeline, but given the importance of the issue they will continue to look into this further.

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