HIGHLIGHTS-Bank of England's Carney speaks on Brexit, economy

LONDON, April 19 (Reuters) - Bank of England Governor Mark Carney was speaking to members of Britain's parliament on Tuesday about the country's membership of the European Union and the outlook for its economy.

Here are some of his comments:

BANK HAS NO APPETITE FOR NEGATIVE INTEREST RATES

What the Bank has made clear is that we think we have conventional monetary policy room, in other words the bank rate is at 50 basis points, we think it can be moved closer to zero.

We have not indicated that we have an appetite for negative interest rates.

NOT A BELIEVER IN HELICOPTER MONEY

In terms of the last element of your question on helicopter money, I'm not a believer in the concept.

IMPACT OF BREXIT ON CITY OF LONDON

[Asked whether London would become a less significant, important and dominating financial centre were Britain to leave the European Union:] It (Other OTC: ITGL - news) would depend on the relationship that was negotiated. It makes it less likely that London would retain its position as it currently is. It would very much, as in many of these, depend on the negotiations.

POTENTIAL FACTORS FOR HIGHER MORTGAGE RATES

There are scenarios where we could have lower GDP and higher inflation. And that would potentially have implications for the path of bank rate, in other words higher bank rate.

The second factor is bank funding costs which ultimately are passed on to borrowers and mortgagers.

So you have two potential factors that work in the direction of potentially higher mortgage rates but I don't need to make that judgement at this stage so I won't.

BREXIT VOTE COULD MAKE FUNDING UK DEFICIT MORE EXPENSIVE

These are balances of probability, but the likelihood is that it will become more expensive to fund that deficit ... and it may mean that for a period the UK economy cannot run as large a current account deficit which means that ... there would be less activity in the economy, less growth.

(Asked about a rise in interest rates at a time when the economy is slowing down anyway:) It would be unhelpful, it would be pro-cyclical, it would reinforce the slowdown.

CONSIDERABLE ISSUES IN CHINA

I think in the medium term, the issues in China are considerable and it very much depends on how they are handled by the Chinese authorities.

GREATER IMPACT ON LABOUR MARKET FROM OLDER WORKERS THAN FROM MIGRANTS

The biggest thing in the labour market ... since the crisis has been a huge positive labour supply shock because older workers, particularly women, have stayed in the workforce longer. That has absolutely swamped the impact of net migration.

As we move forward that effect has been exhausted and net migration becomes more important.

In terms of the overall impact on wages of an increase in net migration, the MPC (KOSDAQ: 050540.KQ - news) 's view as a whole the effects from the perspective of the Bank in monetary policy are not material.

UK BANKS COULD DEAL WITH QUITE LARGE SHOCKS

We have stress-tested those institutions over the course of the last few years against not this shock per se but with elements of a related shock and so I can sit as well as one can and say we think that the capital position of these institutions is resilient to quite large shocks, whether they are domestic or external.

UK'S CURRENT ACCOUNT DEFICIT REMARKABLY HIGH

All economies have vulnerabilities. One of the vulnerabilities in the UK .. is the current account deficit. It is at a historic high.

I think it's safe to say it's running at a rate probably around 5 percent if you strip various things out and have a smooth level, and that is remarkably high for a large advanced economy. That's the challenge.

The current account deficit is not associated with the sharp build-up of private debt.

FDI IN COMMERCIAL REAL ESTATE HAS STOPPED DUE TO UNCERTAINTY

There has been a notable amount (of FDI) that has been into commercial real estate and I think we recognise ... that that has stopped effectively in the last quarter, arguably not unrelated, I would say with a great deal of confidence, related to the uncertainty (about the EU referendum).

BREXIT VOTE WOULD REINFORCE VULNERABILITIES

There are financial stability risks that are raised by this though, there is the possibility that this will reinforce existing vulnerabilities in the economy.

UK TREASURY ANALYSIS VALUABLE FOR SENSE OF DIRECTION

The analysis that was published yesterday and similar analyses published by different groups look at the implications of a specific policy change: in this a case a big, structural policy choice that could be made and is valuable only for the sense of the direction of the impact and giving a sense of the order of magnitude of the impact.

UK TREASURY'S ANALYTIC FRAMEWORK IS SOUND

The analytic framework that was used ... to get the overall macro economic impact is, to my eye, a sound analytic process. The underlying economics of that analysis are not just consistent, they're consistent with our assessment in general of the impact of openness on the UK economy.

BANK WILL NOT PROVIDE FULL COMMENTARY ON TREASURY REPORT

We do not have an intention and I don't think it would be consistent with our remit to provide a comprehensive commentary on this report or another report.

MPC TO PURSUE INFLATION REMIT WHATEVER EU REFERENDUM OUTCOME

Whatever the outcome of the Referendum, the MPC would use its tools to achieve its inflation remit, and, more broadly, the Bank's policy committees will work in concert, as One Bank, to promote monetary and financial stability.

SOME RISKS RELATED TO REFERENDUM MAY BE STARTING TO MANIFEST

In particular, the Committee noted that pressures associated with the Referendum have the potential to reinforce existing vulnerabilities in relation to financial stability, including risks emanating from the very high current account deficit, property markets, market liquidity, and possible negative spillovers to the rest of the EU.

Some elements of these risks may be beginning to manifest.

BANK'S OVERALL POSITION ON REFERENDUM

The Bank of England has not made, and will not make, any overall assessment of the economics of UK's membership of the European Union. At the same time, the Bank must assess the implications of the UK's EU membership for our ability to achieve our core objectives of maintaining monetary and financial stability.

Assessing and reporting major risks does not mean becoming involved in politics; rather it would be political to suppress important judgments which relate directly to the Bank's remits and which influence our policy actions

BANK'S BREXIT CONTINGENCY PLANS

These policy actions include developing, and if necessary implementing, contingency plans. As with the Scottish Referendum, we will communicate as much as is prudent about those plans in advance of any risk materialising and as comprehensively as possible once risks have dissipated.

EFFECT OF A BREXIT VOTE ON DEMAND

A vote to leave the EU might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth. This uncertainty would be likely to push down on demand in the short run.

BUY-TO-LET

The FPC is mindful that there is a long history of rapid credit growth becoming associated with deteriorating underwriting standards and rising systemic threats. Growth in mortgage lending is now being driven solely by the buy-to-let sector. Buy to let mortgages increased by 11.5 percent last year and now account for 17 percent of the stock of total secured lending, twice the proportion of a decade ago. (Reporting by Costas Pitas, Kate Holton and Paul Sandle, editing by Estelle Shirbon)