U.K. banks are prepared to withstand more than just Brexit, according to Bank of England Governor Mark Carney. Stress tests conducted by the central bank show Britain\u2019s financial system would still have more than adequate capital to maintain lending in the face of multiple headwinds, Carney said in a speech in New York on Friday. The bank has been \u201cpreparing for the worst\u201d outcome to the U.K.\u2019s negotiations, including improving liquidity, building capital buffers and planning for disruption to cross-border derivative contracts. \u201cWe judge that the U.K. banking system has the capacity to absorb not only the consequences of a no-deal, no-transition Brexit, but also the losses that could be associated with intensifying trade tensions, a further sharp tightening of financing conditions for emerging markets, and substantial additional misconduct costs,\u201d he said. Carney also reiterated his call for European Union officials to address financial risks related to Brexit. Echoing warnings made by the BOE\u2019s Financial Policy Committee last week, he said that the bloc has only made \u201climited progress\u201d thus far, and \u201ctimely action by EU authorities is needed to mitigate risks to financial stability, particularly those associated with derivative contracts and the transfer of personal data.\u201d Severe But Plausible Stress tests conducted last year required banks to withstand, among other things, a 4.5 percent drop in gross domestic product, house prices plunging by a third and unemployment at 9.5 percent. The scenarios involved in the tests are \u201csevere but plausible,\u201d Carney said Friday. Carney laid out a similar scenario to the U.K. Cabinet last month as part of ministers\u2019 preparations for a no-deal Brexit. In a letter on Wednesday to Nicky Morgan, chair of the Treasury Committee, Carney said he was discussing hypothetical situations in the meeting, and they were \u201cnot predictions of what is most likely to happen, but rather estimates of worst-case scenarios however unlikely they may be.\u201d In a speech that mostly focused on regulation since the financial crisis a decade ago, he added his voice to those of the Federal Reserve, rating firms and commentators in underlining the concern caused by the rapid expansion of the leveraged loan market. \u201cGlobal leveraged lending is growing at rates - and has reached a scale - comparable to the subprime on the eve of the crisis,\u201d he said. He also warned that \u201cthe ethical drift which periodically undermines market integrity and impairs finance\u2019s ability to function effectively\u201d is a danger unless authorities act to prevent it.