The outlook for Britain's financial stability following the Brexit vote "remains challenging" and is dependent on an orderly exit from the European Union, the Bank of England has said.
In its Financial Stability Report the Bank said that as a result of the June 23 vote, the likelihood of risks to financial stability "remains elevated".
The report said: "It will take time to clarify the United Kingdom's new relationships with the European Union and the rest of the world as well as for the UK economy to adjust to these changes.
READ MORE: Royal Bank of Scotland fails Bank of England's stress test and must raise two billion pounds
"The orderliness of the adjustment will influence the risk to financial stability."
The Bank also highlighted the danger to Britain's financial services sector.
"Changes to the trading relationship between the United Kingdom and the European Union may require firms to alter their operations and the services they provide.
"If any such adjustments take place in a short timeframe, there could be a greater risk of disruption to services provided to the European real economy, which could spill back to the UK economy through trade and financial linkages."
The report also said Donald Trump's US election victory earlier this month had "reinforced existing vulnerabilities".
Despite the fall in sterling, a reduction in commercial property prices and indications of reduced investment into the UK, the Bank said economic activity and business sentiment have recovered from "low points" immediately after the referendum and are "materially stronger than had been expected in July".
The report comes alongside the Bank's annual health check for British banks, which saw Royal Bank of Scotland flunk its stress tests.
The lender, which is 73% owned by the taxpayer, emerged as the worst performer in the stress test and has drawn up a plan overnight to bolster its resilience in case of a financial crisis.
READ MORE: Royal Bank of Scotland fails Bank of England's stress test and must raise two billion pounds
Bank governor Mark Carney said clarity on the details of Brexit would help an orderly transition and that it is important British businesses know "as much as possible, as early as possible".
He also dubbed the UK the "investment banker for Europe", adding that it is in the EU's interests for a smooth transition.
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