Carney delivers 'risk' warning over referendum

Giving evidence to MPs, Mark Carney said so-called Brexit would trigger a period of financial instability that could last a “very long time” and warned that some firms were likely to move their headquarters abroad.

Under tough questioning from Treasury Select Committee members, Mr Carney stressed that the Bank was not making any formal recommendation on how people should vote in the referendum.

He also flatly denied that he had been pushed by Downing Street into making a grim assessment of the potential fallout.

Mr Carney said the UK leaving was not currently the “median” expectation of financial players, and highlighted effects such as a drop in the value of the pound.

“The issue is the biggest domestic risk to financial stability, because in part of the issues around uncertainty,” Mr Carney told the committee.

“But also because it has the potential - depending on how it is prosecuted and how these issues can be addressed - to amplify the risks around the current account as has been discussed, potential risks around housing, potential risks around market function which we are trying to mitigate. And also associated risks with respect to the euro area.

“It is the biggest domestic risk to financial stability. ”

In the event of a vote for Brexit, Mr Carney said the Bank “will do everything in our power to discharge our responsibility to achieve monetary stability and financial stability”.

But he added that he could not “provide a blanket assurance that there would not be issues in the short term with respect to financial stability and that potential reduction in financial stability could be associated - and normally would be associated - with poor economic outcomes, as we have seen in the past”.