In its latest Financial Stability Report (FSR), which was released Tuesday, the Bank of England (BoE) notes that global economic conditions have worsened, putting pressure on the finances of households and businesses.
Also, the BoE says that:
- Outlook for the economy is very uncertain;
- There are a number of downside risks that could adversely affect UK financial stability;
- Developments related to Rassia-Ukraine war are key factor that will affect both global and UK outlooks;
- Liquidity deteriorated even in usually highly liquid markets such as US Treasuries, gilts, and interest rate futures;
- Core UK financial markets have remained functional, but conditions could deteriorate further, especially if market volatility increases further;
- UK banks have considerable capacity to support lending to households and businesses even with deterioration in economic outlook;
- UK Countercyclical Capital Buffer (CCyB) rate will be increased to 2% on July 5, 2023;
- Cryptoasset valuations have fallen sharply, exposing a number of vulnerabilities within crypto-asset markets;
- In commodity markets, there is significant risk of further disruption;
- Banks have sufficient capital to continue to meet credit needs of the commodity sector;
- In-depth analysis and assessment of vulnerabilities in commodity markets will be undertaken;
- Headwinds to global and UK economic outlooks pose risks to UK banks;
- BoE will commence its 2022 annual cyclical scenario (ACS) stress test in September this year, and its results will be published in Summer next year