LONDON: The Bank of England on Wednesday warned over risks to UK financial stability from increased geopolitical tensions, including fallout from US President Donald Trump's tariffs.
Many business experts and economists question the aim of the tariffs, warning of higher inflation as the duties raise prices.
"The global risk environment has deteriorated, and uncertainty has intensified," the BoE said in a report, adding that "global risks are particularly relevant to UK financial stability" owing to its "large financial sector."
"Several risks associated with the fragmentation of global trade in goods, and financial markets, have intensified," the BoE said in its latest half-year report on financial stability.
"A major shift in the nature and predictability of global trading arrangements could harm financial stability by depressing growth."
The central bank added that "geopolitical tensions, and risks associated with sovereign debt pressures globally, have also risen."
"As the UK is an open economy with a large financial sector, global risks are particularly relevant to UK financial stability," it stressed.
The BoE also noted that "an environment of heightened risk of cyberattacks could disrupt the supply of financial services to UK households and businesses."
It said that while artificial intelligence "brings potential benefits for productivity growth in the economy... the use of new and advanced forms of AI may also pose financial stability risks that need to be managed."
The BoE's Financial Policy Committee, which produced the report, judged however "that the UK banking system has the capacity to support households and businesses, even if economic and financial conditions were to be substantially worse than expected."