The governor of the Bank of England has today said some of the biggest risks facing the UK's financial ecosystem come from places other than the UK itself.
Discussing the Bank's stress test results and Financial Stability report, which were released this morning, Mark Carney pointed to China's dependence on credit expansion to fund its growth and high borrowing costs and weak growth across some of the Eurozone as two aspects that could wobble the UK in the future as business continues to become more of a global affair.
"The most significant risks to UK financial stability are global," he said. He also noted that the UK "has demonstrated its ability to dampen, rather than amplify, the impact on the real economy of a series of shocks".
Carney added that the UK's decision in June to depart from the EU could open up further financial holes for the Eurozone as time went on.
"Banks located in the UK supply over half of debt and equity issuance by continental firms, and account for over three quarters of foreign exchange and derivatives activity in the EU," Carney said. "If these UK-based firms have to adjust their activities in a short time frame, there could be a greater risk of disruption to services provided to the European real economy, some of which could spill back to the UK economy through trade and financial linkages."
However, that's not to say the Old Lady of Threadneedle Street didn't find any problems closer to home. The Bank of England also pointed to the current account deficit – which stands at 5.9 per cent of GDP – and the tumbling value of sterling as two domestic issues.
Carney, who has recently called for transitional arrangements to be prolonged to create Brexit buffer for businesses, also hinted the referendum result had caused some unwanted wavering in the markets, before moving his focus onto Donald Trump's recent surprise win in the race for the White House.
"In June, developments closer to home brought strains of their own," he said. "And in recent weeks, global asset prices have reacted sharply following the US election, with echoes of the pressure, at the start of the year on sovereigns and banks."