Bank of England has warned about potential risks to financial stability for ages. One of theses days, they may matter
Terrific news: the banks aren’t about to collapse. The UK’s big lenders would continue to be “resilient”, says the Bank of England, even if the dark clouds over the economy turn into a prolonged thunderstorm. They have sufficient loss-absorbing capital to keep lending to households and businesses even in a “severe stress scenario”. For good measure, the governor Andrew Bailey made a sharp comment that banks shouldn’t use worries about resilience as an excuse not to pass on interest rate increases to savers.
To those who fret that the stressed scenario is insufficiently stressful, the Bank had a reasonable response. A projected stressed base rate of 6% (these tests were designed last September) may be close to today’s reality of 5%, but other inputs into the “severe but plausible” sketch still offer yards of headroom.
