Bank of England to keep UK current account deficit under close review.

LONDON (Reuters) - Britain's large current account deficit could damage market sentiment towards the country if the economic environment deteriorates, the Bank of England said on Tuesday.

Minutes from the BoE's Financial Policy Committee meeting on March 24 showed members were worried that Britain's current account deficit -- at around 6 percent of gross domestic product in the third quarter of 2014 -- was high by historical standards.

"(The) current account deficit was large and could, in adverse circumstances, trigger the deterioration in market sentiment towards the United Kingdom," the minutes said.

"The committee agreed to keep their assessment of this risk under close review and would monitor the maturity and liquidity of the financing of the deficit."

FPC members also said "fragile" market liquidity was also a concern, although there was a range of views on its causes. The minutes cited worry that there had been a decline in market-making activities at some financial firms.

Banks have blamed a welter of new capital rules for making market-making less profitable.

The committee said Britain's banks had low exposures to Greece, which is in the midst of negotiating with its euro zone partners to resolve a funding squeeze.

"Nevertheless, the committee judged that, were Greece and its euro area partners to be unable to reach an agreement, more significant effects could arise."

(Reporting by Huw Jones and Andy Bruce)
Culled from Yahoo News.