The External Balance Sheet of the United Kingdom: Implications for Financial Stability? (November 2000)

14 Pages Posted: 3 Aug 2005

See all articles by Stephen Senior

Stephen Senior

Bank of England

Robert Westwood

Bank of England - Monetary Assessment and Strategy Division

Abstract

This article looks at developments in the UK external balance sheet in the wider context of the UK economy and financial system. UK net external liabilities increased sharply in the late 1990s. This largely reflected changing asset values, including exchange rates, rather than financial flows. The currency composition of UK external assets and liabilities means that, other things being equal, a falling exchange rate would reduce UK net external liabilities via valuation changes. In addition, the way foreign direct investment is valued could mean that UK external assets are significantly underestimated. The article also analyzes the impact of banking sector business on the UK external balance sheet. UK external short-term debt is large because of the scale of international banking activities. A comparatively small proportion of this is carried out by UK-owned banks.

Suggested Citation

Senior, Stephen and Westwood, Robert, The External Balance Sheet of the United Kingdom: Implications for Financial Stability? (November 2000). Bank of England Quarterly Bulletin, November 2000, Available at SSRN: https://ssrn.com/abstract=764406

Stephen Senior (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Robert Westwood

Bank of England - Monetary Assessment and Strategy Division ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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