UK Banking System 'Well Capitalised', CCYB Unchanged

The Bank of England sees the UK banking system as 'well capitalised', with banks maintaining a strong liquidity position, the minutes of the June Financial Policy Committee meeting showed.

• According to the minutes, the Banking system has the capacity to support households and businesses, even if economic and financial conditions are substantially worse than expected.
• The return on equity for major UK banks has risen in aggregate to around the cost of equity, while asset quality remains strong.
• The Counter Cyclical Capital Buffer was maintained at the neutral 2%, although the FPC said it would monitor developments and stands ready to vary the UK CCyB rate in either direction if needed.
• The FPC noted ongoing global vulnerabilities, including US CRE risks, China property market risks and some fx pressures from global interest rate differentials.
• Geopolitical risk remained, including the war in Ukraine, the Mid-East and the uncertain economic outlook.