Bank of England official says measures in place to tackle future sterling flash crash

The deputy governor of the Bank of England (BOE) on Wednesday told British lawmakers that the central bank had contingency plans in place in case there was another flash crash of sterling on the foreign exchange markets.

Last Friday, sterling fell to 1.15 U.S. dollars to the pound from 1.26 U.S. dollars during Asian trading, the largest move in the currency since June 24, the day after the Brexit vote. The crash lasted for about four minutes, with sterling recovering to 1.23 U.S. dollars later in the day.

Deputy governor Sir Jon Cunliffe told lawmakers at the Houses of Parliament that "we saw last week news about how Brexit might play out. We've seen the effect on the currency markets...where sterling in Asian markets lost 6 percent of its value in a matter of minutes. We have seen that sort of crash before in U.S. Treasuries, in German Bunds. Some of it is not just to do with news about Brexit coming into the sterling price, but also to do with the way markets are currently configured."

Cunliffe, who holds special responsibility within the BOE for financial stability, added that the market recovered quickly and that he could imagine that "as more news comes in that there is potentially stress in markets. But I do take comfort from the resilience."

"We've done extensive contingency planning beforehand; much of that machinery, much of the preparations we put in place remain there," he added.

Cunliffe said the financial system is now more robust to shocks from market news than it was during the 2008 financial crisis, but he foresaw that there would be further shocks for the market to absorb as the Brexit process unwound. Endi