HIGHLIGHTS-Carney speaks after BoE moves to address Brexit concerns

LONDON, July 5 (Reuters) - Bank of England Governor Mark Carney and other BoE officials are holding a news conference after the central bank took steps on Tuesday to address concerns over the country's vote to leave the European Union.

MARK CARNEY, BANK OF ENGLAND GOVERNOR:

PERIOD OF UNCERTAINTY

"The UK has entered a period of uncertainty and significant economic adjustment. The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds."

"At its March meeting, the FPC judged that 'the risks around the referendum (were) the most significant near-term domestic risks to financial stability'. Some of those risks have begun to crystallise."

INDEBTEDNESS

"We have been concerned for some time about these issues, the interplay between high levels of household indebtedness and the housing market and the possibility that there will be more vulnerable households."

CURRENT ACCOUNT

"In and of itself, the movement in sterling should be beneficial for the current account.

"But... the pace of investment will also be quite important in terms of where the balance is going over time."

BOE STAFFING

"The short answer is yes, we do have the capacity (to handle the Brexit process). We may have to prioritise what we work on, but we will do that. Of course, our contribution will be technocratic, it will be analytic."

CONSTRUCTION

"We're seeing indicators not just in terms of volume of transactions in commercial property but leading indicators around construction that in the run-up to the referendum they were slowing, to put it mildly, in construction and the possibility that that is going to continue.

"One of the things that Andrew Bailey and his team have done ... over the years is to ensure that the exposure of UK banks to commercial property has been kept quite manageable."

CENTRAL BANK COORDINATION

"Vis a vis the major central banks, as you'd expect, we've been in close contact with them, even more intensive contact in the run up to the referendum and in the immediate aftermath. I would say that that co-ordination, cooperation was effective in building a mutual understanding of the risks and the potential channels to help to prepare private financial institutions."

"In terms of spillovers of the actual vote as markets settle down a bit it has heightened focus on these issues of bank profitability, bank balance sheets in some jurisdictions. There is a sense that there could be a heightened degree of risk aversion for a period of time."

"We have seen quite a remarkable, in the true sense of the word, movements in global government yields, which suggest certain paths for the economy and as a consequence for policy, so the spillover are notable but the system globally has worked well."

STRONG CORE SYSTEM

"The core of this system is very strong, we may see some volatility, we may see things move around, but the system is going to be there for someone who wants to buy a house or a business person with a viable plan."

"We have movements in the gilt curve which, to put it mildly, are not consistent with an acceleration in the pace of growth in this economy."

EQUITY MARKETS

"In terms of the equity markets I would focus a little bit more on the domestically-focused stock, the FTSE 250 or the component of FTSE 100 that is principally serving this economy.

"There's been a much more significant move in those equities in pound terms or and in common currency terms, certainly in dollar terms, ... and that gives a sense of investor expectation which may not prove out.

"The all-in funding costs for banks ... haven't really budged and that is a testament to the resilience that has built up."

RECESSION

Asked about whether the UK could fall into recession, he said he would defer that answer until the MPC (KOSDAQ: 050540.KQ - news) produced its next forecast in August.

"The MPC always recognised that the movement in sterling would help with the adjustment.

"The question is the scale of the other effects, the impact of this change on demand - one sees it initially in demand for larger, lumpier, irreversible investments - whether somebody is buying a house, building or buying commercial real estate, making a large business investment.

"There's a growing body of evidence ... before the referendum that all of those were slowing. Everything we've seen since, albeit it's early days, it's mainly survey based, has suggested continuation of those trends.

"Even (Taiwan OTC: 6436.TWO - news) taking into account movement in the exchange rate, there is a prospect of material slowing in the economy."

ON CREDIT

"If we do see a slowing in credit growth, it'll be demand driven, not supply driven."

"The FPC is today reducing the counter-cyclical capital buffer on banks' UK exposures from 0.5 percent to 0 percent with immediate effect.

"This is a major change. It (Other OTC: ITGL - news) means that three quarters of UK banks, accounting for 90 percent of the stock of UK lending, will immediately have greater flexibility to supply credit to UK households and firms."

ON MARKETS

"Let's focus on the positives which is that financial markets are doing their jobs, they are adjusting to this change.

"There have been some reduced volumes in gilt markets and some heightened volatility but not inconsistent with the scale of the issue.

"The adjustment in sterling, which has been significant ... and sharp in the initial period, in fact, volatility spiked to its highest level ever, but that adjustment has moved in the direction that is necessary to facilitate some of the economic adjustments that are going to be required in the economy."

ANDREW BAILER, CEO OF FCA

ON STANDARD LIFE FUND SUSPENSION:

"The fact of suspension is designed into these structures, it's not a panic measure, it's designed into the structures to deal precisely with that situation where there's been some shock to the market if you like and there's a presumption of a valuation adjustment which is quite hard to capture in illiquid assets."

"Now (NYSE: DNOW - news) we are, speaking as the FCA here, we are in very close touch with the firms, let me be clear on that."

"I think it does point to issues that we need to look at in the design of these things because it comes back to my fundamental point about holding illiquid assets in open end funds that revalue and are required to be revalued .... My own feeling is ... that we will need to come back and look at those." (Compiled by Kate Holton, Sarah Young, Andy Bruce and Michael Holden)