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By Bilal Hafeez 16-08-2019

Tracking Foreign Capital (Bank Underground, 4 min read)

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new paper by the Bank of England explores how foreign capital inflows specifically aimed at UK banks and financial institutions are channeled at home. Such flows can be large (they reached 100% of GDP pre-crisis) and volatile. The paper shows that they boost domestic lending to corporates and to other banks; pre-crisis, the funds indirectly reached households and the public sector, too. But post-crisis, patterns switched, and UK banks channeled foreign capital mostly back abroad.

Why does this matter? If FDI into the UK is to dry up, which is likely given low-interest rates and Brexit uncertainty, it’s useful to know that this won’t have any significant damage on home industry because they will probably flow back abroad.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

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