MNI: 5 Things We Learned From Nov BOE FPC Financial Stability Report>

     By Jamie Satchithanantham and David Robinson

     LONDON (MNI) - The following are the key points from the November 

Financial Stability Report released Tuesday by the Bank of England 

Financial Policy Committee:

     - UK banks are well placed to resist severe economic shocks. The 

2017 stress test, replicating conditions more severe than the global 

financial crisis, showed that the UK Banking Sector would be resilient 

enough to provide support to the real economy through a range of Brexit 

scenarios, including a 'disorderly' one. 

     - The 2017 annual test scenario reflected a 2.4% fall in global GDP 

(worse than GFC), a 4.7% fall in UK GDP, UK jobless rate rising to 9.5% 

(worse than GFC), house prices down 33% (largest on record), commercial 

real estate prices down 40%, Bank Rate peaking at 4% and sterling down 

27%. 

     - But things could be worse still for the banks. A combination of a 

disorderly Brexit, a severe global recession and stressed misconduct 

costs could result in more severe conditions than the stress test. In 

this case, capital buffers may be drawn upon while lending to the real 

economy would be more likely restricted. The BOE will do more work on 

this in 2018. 

     - The counter cyclical capital buffer rate will rise to 1% from 

0.5%, with binding effect from 28 November 2018, establishing a 

system-wide UK buffer of stg11.4bn. The FPC will revisit the adequacy of 

the 1% CCyB in the first half of 2018 when the overall risk environment 

had evolved. Raising the CCyB is designed to lock-in the improvement in 

banks' capital positions.        

     - Away from Brexit, consumer credit was once again cited as another 

potential source of risk to the financial stability. In the year to 

September, the outstanding stock of consumer credit was up 9.9% with 

consumer borrowing equal to 1.4% of consumer spending. Reduced overseas 

invest appetite was also seen as a risk, through its channels to the 

UK's external balance sheet and the current account.    

     e-mail: jamie.satchithanantham@marketnews.com 

[TOPICS: M$B$$$,M$$BE$]