Brexit no longer poses the single biggest risk to financial stability, the Governor of the Bank of England has said.

Mark Carney added that Britain's exit from the European Union is a greater threat to financial stability in Europe than in the UK.

Asked by politicians on the UK Treasury Select Committee if Brexit remains the biggest risk to the UK's financial stability, Mark Carney said: "Strictly speaking, the view of the committee is no."

However, he said Britain faces global risks and the process of adaptation to life outside the EU has the potential to "amplify" those risks.

"In the run-up to the referendum we said it was the largest risk because there were a serious of positions and possibilities in the financial sector, things that could have happened, that could have had financial stability consequences," Mr Carney stated. 

Mr Carney said the disruption to Britain's powerhouse financial services sector during Brexit would lead to "shortfalls in capacity" and capital liquidity being in the wrong place, which could have a greater impact on the EU than in the UK.

"I am not saying there are not financial stability risks in the UK, and there are economic risks to the UK, but there are greater short term risks on the continent in the transition than there are in the UK," he told the committeed. 

The Bank of England said in November the outlook for Britain's financial stability following the Brexit vote "remains challenging" and is dependent on an orderly exit from the European Union. 

Asked whether Britain needs to thrash out a transitional deal for the financial services sector as soon as Article 50 is triggered, Mr Carney said it would be in the interest of both the UK and the EU.

"It is the best mitigant to those (financial stability) risks, yes. It's welcome. If there is not such a transition put in place, which in our view will have consequences, we will work to mitigate those consequences as much as possible," he stated.

Mr Carney's comments come after Xavier Rolet, chief executive of the London Stock Exchange Group, told the Treasury Select Committee yesterday that the financial services industry should be handed a five-year transition period after Article 50 is triggered.

His call for a Brexit bridge was echoed by Douglas Flint, group chairman of HSBC, who said a two-to-three year transition was needed so financial firms can adapt.

However, the Government's Brexit secretary David Davis said in December he would accept a transitional arrangement "if it's necessary and only if it's necessary".