(30 January 2025 – United Kingdom) The Bank of England (BoE) has warned financial institutions (FIs) must prepare for geopolitical risks given the potential for increased regulatory and trade restrictions in addition to more extreme cyber or physical warfare.
Financial Policy Committee (FPC) member Carolyn Wilkins warned FIs and authorities not to repeat the mistakes made prior to the Global Financial Crisis, calling for them to “work together to mitigate the potential impact of geopolitical risks” with a focus on resilience, diagnosis and preparedness.
“The shadows cast by wide-ranging geopolitical dragons are long, darkening the lives and livelihoods of many people in many countries. In a geopolitical operational scenario financial institutions, governments, and central banks will all likely be called on to respond, and they need to be ready” Wilkins said in a speech for Fitch Ratings.
“Geopolitical threats create financial stability risks because they increase the chances of downside tail-risk scenarios, which require substantial financial and operational resources to withstand. The UK is home to banks with very large foreign operations and, the UK celebrates its large, open international financial centre.”