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The Bank of England in Europe: Does EU membership constrain non-Euro central banks?

The ECB and its response to crises in the euro area have been in the spotlight recently. But how does EU membership affect the central banks of non-Eu


Matt Holmes

Managing Director Government and Regulatory Affairs, Deutsche Bank,

The Bank of England (BoE) has a dual mandate to protect price and financial stability. A recent BoE report assessed the impact of Britain’s EU membership on the Bank’s ability to deliver on this mandate. The conclusion was that the Single Market makes the UK more dynamic and competitive, and that inflation is thus easier to control. The report also found little evidence that EU membership prevents the BoE effectively using monetary policy instruments to manage medium-term UK inflation.

However, increased openness and financial integration make the UK more vulnerable to financial contagion and shocks. Much financial regulation is decided at EU level, and policymakers have understandably focused a great deal on the stability of the euro area. Care must be taken not to ignore the particular needs of the UK, which sits outside the euro area but also houses the EU’s largest financial centre, London.

We were delighted to welcome Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England, who presented the Bank’s report. This was followed by a discussion of the findings with Sheri Markose, University of Essex, and Matt Holmes, Deutsche Bank.