The UK banking system could continue to support the real economy through a disorderly Brexit, the Bank of England has said.

Its Financial Policy Committee said Brexit risks did “not warrant additional capital buffers for banks” and developments since November "have not changed this assessment".

“Since November, in the United Kingdom, progress has been made towards mitigating risks of disruption to the availability of financial services. Nonetheless, material risks remain, particularly in areas where actions would be needed by both the UK and EU authorities,” the Committee added.

The Committee said it has noted some signs of rising domestic risk appetite in recent quarters.

Gross issuance of leveraged loans and high-yield bonds by UK companies increased in 2017 and valuations in some segments of the UK commercial real estate sector appear stretched.

In the mortgage market, the proportion of new owner-occupier mortgages at high loan-to-income ratios, including just below 4.5 (the level at which the FPC’s limit on the flow of new mortgages applies), has increased, and spreads between mortgage rates and risk-free rates have tightened.

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