By Huw Jones

LONDON (Reuters) – Banks in Britain have been shielded from the worst effects of the COVID-19 pandemic by government relief measures and the toughest time has yet to come, Bank of England Deputy Governor Sam Woods said on Friday.

Government relief schemes such as furlough payments and guarantees on banks’ loans to companies have cushioned banks against fallout from the crisis, but these will be wound down in coming months.

“We feel good about what’s happened so far but in a way the tougher bit is coming,” Woods told a London School of Economics webinar. “The government has pushed out a lot of the stress in time, but some will still come through.”

The big British banks collectively hold 260 billion pounds($356.49 billion) of equity capital – a “fairly decent number” – but it will be under more pressure this year as some corporate loans turn sour, Woods said.

“I am not worried about that, it will be manageable but it will be significant.”

The BoE also has “absolutely” no interest in lowering regulatory standards now that Britain is outside the European Union, he said.

The City of London has been largely cut off from the EU since Dec. 31, with the EU yet to go beyond the limited and temporary access it has granted for a very limited range of cross-border activities.

Andrea Enria, who heads the European Central Bank’s banking supervision arm, told the same event that a shift in 1.2 trillion euros ($1.44 trillion) of assets from London to new EU banking hubs due to Brexit was well underway.

But Enria also said: “It would be extremely short-sighted if we didn’t recognise the close connection that remains between the banking sectors in the EU and the United Kingdom in the years to come.”

“To a very large extent the European corporate issuers of equity, debt securities, syndicate loans continue to directly rely on banks headquartered in London in particular,” he added.

(Reporting by Huw Jones; Editing by Toby Chopra and Jane Merriman)