BOE FPC statement from 20 Sept meeting now published 25 Sept
- new requirements to be set after Nov stress tests
- increased risk of consumer credit losses over past year means banks will need to hold extra GBP 10bln of capital
Well they've been fed it cheaply enough for past few years.
- FPC judges that overall risks to UK financial stability from the domestic environment are broadly unchanged at a standard level. However, there are signs in some markets, globally and domestically, of excessive weight being placed on recent benign conditions as an indicator of future risks. This behaviour encourages greater risk taking, potentially building up greater vulnerabilities.
- still expect to raise CCCB to 1% from 0.5% at Nov meeting with effect from Nov 2018
- Brexit poses risks of continuity of derivative and insurance contracts
- increased risk reflects deteriorating loan quality, tougher stress tests inc 4% bank rate
- ave loss rate of 20% for UK consumer lending in 2017 compares with 13% in 2016
"The FPC and PRC judge that, in the first three years of that severe stress test scenario, the UK banking system would, in aggregate, incur UK consumer credit losses of around £30 billion, or 20% of UK consumer credit loans, representing 150 basis points of the aggregate common equity Tier 1 capital ratio of the UK banking system. This is just one element of the overall stress test and should not be used as a guide to lenders' overall results, which will be published as planned on 28 November. "
BOE FPC out with timely cautionary report.
Full statement here
GBP pairs unfazed. GBPUSD still 1.3535 EURGBP 0.8800 but then again the blinkers are still on.
BOE - Will set extra capital requirements for banks
