Bank of England hits back at EU over banks' Brexit readiness

* BoE (Shenzhen: 000725.SZ - news) says UK banks prepared for no-deal Brexit

* Carney calls EU regulator's Brexit assessment "incomplete"

* No change for UK banks' counter-cyclical capital buffers

* Industry lobby CityUK says onus on EU regulators to act

(Adds EBA comment)

By Andy Bruce and Huw Jones

LONDON, June 27 (Reuters) - The Bank of England hit back at

European Union criticism on Wednesday, saying British banks were

fully prepared for any disorderly Brexit and that it was the EU

itself which should act to prevent market disruption.

BoE Governor Mark Carney challenged assertions made by the

EU's banking watchdog, the European Banking Authority (EBA), on

Monday that banks were inadequately prepared for a hard Brexit.

"With (Other OTC: WWTH - news) respect, the EBA's comments earlier this week were

incomplete," Carney told a news conference. "They did not

acknowledge the temporary permissions regime... which has been

very clearly signalled by the UK government."

This regime would allow branches of EU banks in London to

continue operating after next March, when Britain leaves the EU,

but the EU has yet to reciprocate for UK lenders operating in

the bloc.

"While UK authorities are putting in place measures to

address financial stability risks that can be dealt with

unilaterally, the complete set of mitigants to the risks of a

cliff-edge Brexit also rely on the efforts of EU authorities,"

Carney told reporters.

The BoE's Financial Policy Committee (FPC) said in a

statement banks in Britain hold enough capital and do not need

any more to cushion themselves against financial market

turbulence if Britain leaves the EU without a transition deal.

On Monday, the EBA said banks had failed to make enough

progress in their Brexit preparations and should not expect help

from a "miracle" of public intervention.

The EBA said on Wednesday it was aware of Britain's

temporary permissions proposal, but that it required a

legislative and political process to put into effect.

"Thus, whilst uncertainty persists, banks cannot take it for

granted," EBA said.

Carney said British authorities' preparation of banks for

Brexit had been "rock solid" and that the BoE continued to judge

that the UK banking system could support the real economy

through a disorderly Brexit.

The BoE said the EU needs to commit to action similar to

Britain to ensure that 29 trillion pounds ($38 trillion) in

derivatives held by British and EU banks and companies remain

enforceable after March if there is no transition deal.

Industry group CityUK welcomed Carney's comments.

"The biggest barrier to addressing this issue is the EU

regulators' failure to accept and get to grips with the risk.

This must not be drawn into the politics of Brexit - it is a

technical challenge which needs a technical solution," CityUK's

chief executive, Miles Celic, said.

CAPITAL BUFFERS UNCHANGED

In a sign of the BoE's confidence in the ability of lenders

to withstand a hard Brexit, the FPC said capital levels at banks

could be left unchanged.

The so-called counter cyclical capital buffer or CCYB would

remain at 1 percent, binding from the end of November, the FPC

said.

This buffer aims to ensure banks build up capital to guard

against risks as the credit cycle picks up, which they can then

draw on during a downturn. It applies on top of other

internationally-required buffers.

The FPC said consumer credit continued to expand rapidly,

but measures already taken to stop overheating were having an

impact, with banks reporting a significant tightening of

unsecured credit.

The FPC also said that next year it would launch its first

pilot stress test to check on the ability of certain lenders'

payments systems to recover from a severe cyber attack within a

pre-determined amount of time.

Trade tensions and risks from the global economy had

intensified, the BoE said, and Carney described recent

developments in global trade politics as "concerning".

($1 = 0.7584 pounds)

(Additional reporting by David Milliken and Elisabeth O'Leary;

Editing by Toby Chopra)