Bank of England asks banks to hold more capital

16th IAAF World Athletics Championships London 2017- Day Three

The Bank warns that, in the first three years of its so-called severe stress scenario - a recessionary environment, in laymans terms - "the UK banking system would, in aggregate, incur UK consumer credit losses of around £30bn, or 20pc of UK consumer credit loans".

The FPC's report read; "There are signs in some markets, globally and domestically, of excessive weight being placed on recent benign conditions as an indicator of future risks". As a result, the committee said, lenders "have been underestimating the losses they could incur in a downturn".

Consumer credit grew at a rate of 9.8 per cent in the year to July, reflecting booming auto loans and credit card lending.

"The FPC also expects that banks will begin to factor these market-wide levels of stressed losses on consumer credit into their overall lending and capital plans", the committee said.

It estimated that in a "severe downturn", United Kingdom banks could incur losses of £30bn.

"This is not a material risk to economic growth, as consumer credit represents only 11% of overall household debt", the statement said.

MOORE: Rookie kicker Jake Elliott might have saved Eagles season
Even a transcendent player like Beckham or a top defense like the Giants have can't overcome so many self-created setbacks. I don't think this set us back any ". "We were playing outside man and basically he got outside and I just tried to break.

British consumer borrowing is growing at almost 10% a year, far faster than incomes, and the Bank's Financial Policy Committee said it would tell banks by the end of the year how much extra capital to hold, based on the riskiness of their lending.

Labour's shadow Chancellor, John McDonnell is due to call for a cap on credit card interest payments at the party's conference later on Monday to ensure that no one pays more in interest than the original amount borrowed.

The extra capital they require is relatively small compared with the 280 billion pound that banks already have to keep back against potential losses, a buffer that the regulators hope will prevent a repeat of the financial crisis of a decade ago.

Though consumer credit has increased over the past year amid low interest rates, Paul Hollingsworth, U.K. economist at Capital Economics, noted the recent slowdown.

On Brexit, the committee voiced concerns about the potential financial impact on British firms, saying Britain and the European Union would need an agreement.


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