The Bank of England’s Financial Policy Committee (FPC) assesses the outlook for UK financial stability by identifying the risks faced by the financial system and weighing these against the resilience of the system.
The FPC has now published a statement following its policy meeting on 23 September 2015. In particular the FPC notes that immediate risks in relation to Greece and the euro area have fallen from their acute level since the July 2015 Financial Stability Report. However, other downside risks to UK financial stability stemming from the global environment, and to which the UK as a global financial centre is exposed, have increased. According to the FPC these risks come from both China and emerging market economies more broadly.
Weighing against these risks, the FPC states that there has been continuing improvement in the resilience of the UK banking sector. Major UK banks’ core equity Tier 1 (CET1) capital ratios have increased by 1.1 percentage points over the past year to 11.9%. UK bank funding spreads rose only a little in response to market volatility in recent months.
In light of its assessment of the outlook for financial stability, the FPC is maintaining the countercyclical capital buffer rate for UK exposures at 0%. This setting will be reviewed in Q4 2015 in light of the 2015 stress test results.
View FPC statement from its policy meeting, 23 September 2015