- Higher interest payments on loans mean borrowers may struggle with repayments
- That increases the risks faced by banks
- But UK banks are resilient and are strong enough to support their customers
- Counter cyclical capital buffer maintained at 2%
- UK households are facing challenges from increased living costs and higher interest rates
- But UK banks are in a strong position to support customers who are facing payment difficulties
- They have large capital buffers to absorb losses
- According to stress test results, the UK banking system would continue to be resilient
- That is even if economic conditions turned out to be much worse than we expect
- Full report
While financial conditions have normalised since the banking crisis in March to April, credit conditions are still tighter than before as seen above. That is an interesting part to note, especially since higher interest rates are also going to crunch consumers and businesses further in the months ahead.
But for now, the BOE is pretty much saying that whatever the stress may be on the UK financial system, they can take it.