On 12 October 2022, the Bank of England (the Bank) published a financial policy summary and record of the Financial Policy Committee’s (FPC) meeting on 30 September.

The financial policy summary addresses:

  • Global economic and financial market developments – Since the July 2022 Financial Stability Report (FSR), the global economic outlook has continued to deteriorate significantly, and by more than has been expected. Financial conditions have tightened further, and financial markets have remained volatile in recent months, with significant rises in government bond yields, large moves in exchange rates and falls in risky asset prices.
  • Global debt vulnerabilities – Rapid increases in the prices of a range of goods, including energy, and tighter financial conditions will continue to weigh on debt affordability for households, businesses and governments in many countries.
  • UK economic and financial market developments – The intensification of inflationary pressures, reflecting, in part, Russia’s reduction of gas supplies to Europe, and the associated tightening in global financial conditions since the July 2022 FSR have led to further material deterioration in the UK economic outlook.
  • UK debt vulnerabilities – In the UK, higher inflation and rising interest rates will weigh on households repaying debt. Rising interest rates will also increase debt-servicing costs for UK corporates, while high input costs and lower household demand will impact business earnings.
  • UK external financing vulnerabilities – The  size and composition of the UK’s external balance sheet makes it vulnerable to reductions in foreign investor appetite for UK assets, which can cause falls in the UK asset prices and tighter credit conditions for UK households and businesses.
  • UK bank resilience – The FPC continues to judge that major UK banks have considerable capacity to support lending to households and businesses even with the further deterioration in the economic outlook. Major UK banks’ capital and liquidity positons remain strong, and profitability has strengthened in aggregate.
  • The UK countercyclical capital buffer rate – the FPC is maintaining the UK countercyclical capital buffer rate at 2%. This rate will come into effect on 5 July 2023, in line with the generally required 12-month implementation period.
  • The 2022 annual cyclical scenario – To support the FPC’s monitoring and assessment of the resilience of banks to potential downside risks, the Bank commenced its annual cyclical scenario stress test in September 2022.
  • The Future Regulatory Framework – The Financial Services and Markets Bill will, among other things, implement the outcomes of the Future Regulatory Framework Review, which was established by the previous government to consider how the UK’s financial services regulatory framework should adapt for the future, and in particular reflect the UK’s position outside the EU.

The FPC’s next policy meeting will be on 28 November 2022 and the record of that will be published on 13 December 2022.