MNI BRIEF: BOE FSR Sees Resilient Banks, Highlights Risks

The BOE's July Financial Stability Report highlighted the resilience of the UK banking sector and confidence in the capacity of the domestic banking system to continue supporting lending despite economic outlooks worsening.

Capital ratios are anticipated to decrease slightly following reduced requirements during the pandemic. Positioning remains robust.. Banks are seen as capable in managing lending risk and acting conservatively when faced with real economic credit risks. However, significant tightening and restriction of capital lending must be avoided in order to avoid negative consequences for both the wider economy and bank profit margins.

The BOE has decided to raise the CCyB to 2% from 1%, effective July 2023 given the 12-month lead in period.