BOE: FPC Note Bank Strength; Derivative Contracts....>

BOE: FPC Note Bank Strength; Derivative Contracts Remain Uncertain 

------------------------------------------------------------------------ 

The BOE FPC issued a statement from its policy meeting saying that 

the major UK banks' capital strength is sufficient to accommodate severe 

stress test scenarios, including a cliff-edge no-deal Brexit. Risks 

however remain in the insurance and derivatives market. Whilst UK agents 

using EU clearing houses will have their derivative contracts serviced 

by the UK, as it stands the same cannot be said for EU agents using UK 

clearing houses, with the clearing houses unable to manage exisiting 

derivative contracts without action from the EU. Both cleared and 

uncleared derivative contracts total stg99 trn in notional value. The 

FPC also noted strong increases in loans to highly leveraged companies. 

New stock of such loans in 2018 is anticipated to come in at stg31 bn - 

three times the amount Banks are lending to businesses.