BOE: FPC Says Bank's Tier One Ratios Strong Enough...>

BOE: FPC Says Bank's Tier One Ratios Strong Enough to Support Brexit 

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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. Aggregate tier 1 capital ratios have tripled 

since 2007, standing at 17% in 2018Q1. A stress test encompassing more 

severe conditions than Brexit sees this capital ratio lowered to 10.3% 

showing further capital requirements due to Brexit are unwarranted. 

Consequently, domestic risks remain standard overall whereas global 

vulnerabilities have increased, most notably with debt levels in China 

remaining hihgly elevated. Brexit risk primarily comes in the form of 

derivative contracts which mature in 2019 and onwards. There has been a 

lack of progress on this, with the EU not making any offer to permit the 

continued servicing of up to stg29 trillion. Whilst domestic risk has 

not provided the FPC with cause for concern, there are signs of 

continued domestic risk appetite shown by leveraged lending to 

corporates expected to be higher in 2018 than the record year of 2017.