BoE warns of British current account deficit risk

The Bank of England (BoE), the British central bank, Tuesday noted that Britain's record current account deficit could trigger "deterioration in market sentiment" towards the country if its economic recovery falters.

In its quarterly meeting minutes, the Financial Policy Committee (FPC) of the BoE said that the British current account deficit increased to 22.8 billion pounds (34 billion U.S. dollars) in the third quarter of 2014, equal to around 6 percent of the country's gross domestic product (GDP), before shrinking to 22 billion pounds in the fourth quarter.

The FPC said: "The committee agreed to keep their assessment of this risk under close review and would monitor the maturity and liquidity of the financing of the deficit."

The body also warned that the risks surrounding Greece had increased and low growth in the euro zone would exacerbate financing challenges in highly indebted economies.

Although Greece only accounts for less than 2 percent of euro zone GDP, and British banks have already cut down their exposure to other highly indebted states of the euro zone, the banks' links to these countries were still large, equivalent to over 60 percent of British banks' aggregate common equity tier-one capital, said FPC.

The regulator added: "Given the above material risks, Bank (BoE) staff had been working closely with the Treasury and the Financial Conduct Authority to ensure contingency plans were in place."

The FPC meeting was held on March 24, 2015. (1 pound = 1.49 U.S. dollars) Endit