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U.S. financial stability faces threat from Brexit 

July 25, 2016

Lisa Lambert & Cynthia Osterman, Reuters

The U.S. financial system faces greater potential instability due to Britain's decision to leave the European Union while low and negative interest rates also raise risks, a U.S. government monitor said on Monday.

In its biannual update on U.S. stability, the Office of Financial Research said overall risks "remain in the medium range but have been pushed higher by the United Kingdom vote to exit the European Union."

Risks have been in that range for at least 18 months, said Richard Bermer, director of the office, which provides regulators with analyses intended to help prevent a major financial crisis, at a press conference.

Bermer added, though, the Brexit vote's effects could be felt in the United States for a while, as finalizing details of Europe's divorce will take years.

"Larger shocks to confidence are possible as those deliberations and negotiations play out," he said. "Because the U.K. economy, and especially the U.K. financial system, are highly connected with the rest of Europe and United States, severe adverse outcomes in the U.K. and spillovers to Europe could pose a risk to U.S. financial stability." Read more

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