Brexit 'biggest domestic risk to financial stability'

Britain voting to leave the European Union in June's referendum would create the "biggest domestic risk " to the country's financial stability, Bank of England governor Mark Carney warned lawmakers Tuesday.

Under tough questioning from the Treasury Select Committee, Carney stressed that the BoE was not recommending on how people should vote on June 23 and denied that Prime Minister David Cameron's Downing Street office had pressured him to present a bleak picture of a "Brexit", or Britain exiting the EU.

"The issue is the biggest domestic risk to financial stability, because in part of the issues around uncertainty," Carney told the committee.

"I would say that in my judgement the global risks, including from China, are bigger than the domestic risks."

Questioned by leading Eurosceptic lawmaker Steve Baker, Carney said he was "expressing views that are the views of the institution", adding that the Bank was "not leaned on by anybody".

The rebuttal comes after the head of a major British business group resigned from his post Sunday after publicly backing leaving the European Union, sparking a row over whether he had stepped down owing to political pressure.

John Longworth quit as head of the British Chambers of Commerce after he expressed support for Britain leaving the EU at the group's annual conference, despite the BCC's official stance of neutrality.

- 'Contingency plans' -

Carney on Tuesday acknowledged that "a number of institutions are contingency planning" for a Brexit, notably major foreign institutions with European headquarters in Britain.

He meanwhile said that membership of the European Union reinforces the country's economic "dynamism".

Carney expressed the view in a letter to the head of the Treasury Select Committee before facing questions from the cross-party panel of lawmakers.

"A more dynamic economy is more resilient to shocks, can grow more rapidly without generating inflationary pressure or creating risks to financial stability and can also be associated with more effective competition," Carney wrote.

At the same time, Carney stressed in the letter that "increased economic and financial openness means the UK economy is more exposed to economic and financial shocks from overseas" and that in recent years closer integration with the EU and eurozone might have increased "challenges to UK economic and financial stability".

On Monday, the Bank of England said it would make extra cash available to banks around the time of the referendum.

It is aimed at helping the financial industry to keep ticking over during possible periods of market turbulence or when there might be a risk of a "credit crunch" -- a reduction in the availability of loans that can worsen an economic downturn.

Currency markets have already been rocked by fears that Britain could leave the 28-member bloc, with the pound sterling dipping to near a seven-year low against the dollar last month.

Opinion polls show that the campaign to remain within the EU is slightly ahead, but its lead over the "leave" campaign has narrowed in recent months ahead of the referendum.