MNI: UK Banks Still In Strong Capital Position - BOE FPS

Major UK banks still have strong capital an liquidity positions and will be able to withstand any severe market and economic disruptions from Russia's invasion of Ukraine, according to the Bank of England Financial Policy Summary published Thursday.

The BOE has tested the resilience of banks against a range of severe economic shocks and their standing, which saw a Common Equity Tier 1 capital ratio of 16.3% at the end of 2021, remains strong.

Although most banks have limited exposure to Russia and overall UK trade links are low, the BOE does acknowledge indirect channels through which the Ukraine crisis could pose risks to the UK financial system. I also notes the ongoing disruption to global supply chains could have a significant impact on the economy in the UK and elsewhere.

The Bank is maintaining the Countercyclical Capital Buffer (CCyB) at 1% and will look closely at whether to increase the rate to 2% -- as stated in the December Financial Stability Report -- and, in a nod to the continuing economic uncertainties, stands ready to vary the CCyB rate in either direction in line with evolving conditions.

A full evaluation of the situation will be taken around the time of the BOE's May Monetary Policy Report.

The BOE also hopes to reinstate the annual cyclical scenario, or the bank stress tests, with an announcement expected sometime in Q2 2022. Dependent on the timing of the start of the survey, the actual stress test results may be released in December, but could be adjusted later.

The BOE's stress testing of the banking system have been sidelined for the last two years as the UK economy dealt with the fallout from the Covid-19 pandemic.

Looking at cryptoassets, the Financial Policy Committee judged that direct risks to the UK financial system are currently 'limited', but risks could grow in future years if their pace of growth and interconnectedness to the system continued