Latest news with #FinancialPolicyCommittee
Bloomberg
3 days ago
- Business
- Bloomberg
Reeves Pledges to Reform UK's Ring-Fencing Rules
CC-Transcript 00:00 Now let me turn to the changes I'm making to capital requirements to allow UK banks to do more lending and release more capital for investment into our infrastructure and into our businesses. First, I'm supporting the Bank of England's decision to raise the asset threshold for AML requirements to between 25 and £40 billion. This will both benefit the Challenger banks and bring increased competition and innovation to the market and support those businesses to expand their footprint here in the UK. Second, I am confirming our approach to Basel 3.1 implementing lower capital requirements for domestically focused banks from January 2027, while preserving flexibility on our approach for international banks to ensure that the UK always remains competitive whilst aligning with international standards. Third, I have committed to meaningful reform of the UK's ring fencing regime. Recognizing that now is the time to go further in tackling inefficiency and boosting growth. While retaining the aspects of the regime that support financial stability and protect consumer deposits. And fourth, following the new growth focused remit letter I sent in November, I welcomed the Financial Policy Committee's announcement that it will review the overall level of bank capital needed for UK financial stability. Reporting back to me by the end of this year. The review will inform the work that the Treasury is taking forward with the bank to ensure the prudential framework strikes the optimal balance to deliver resilience, growth and competitiveness.
Yahoo
10-07-2025
- Business
- Yahoo
The Bank of England is dying for data on private markets
Andrew Bailey's svelte profile has attracted much City chatter the past year. Some say the guv'nor has a strict exercise regime to lose weight; skeptics reckon it's Ozempic. Here's my theory: Bailey is wearing so many different hats, the constant switch between them means the pounds are flying off. His CV is giving George Osborne a run for his money: Bank of England governor, Financial Policy Committee chair, Prudential Regulation Committee member, Monetary Policy Committee chair. Last week he added another: Chair of the Financial Stability Board. Therefore, a new hat – this one a green alpine one, a nod to the FSB's Basel headquarters. All these roles culminated in dramatic scenes yesterday. In the afternoon, Bailey led a press conference to discuss a report on financial stability by the Financial Policy Committee. That same afternoon, he hot-footed it to another press conference, to discuss a separate report on financial stability by the Financial Stability Board. Bewildered financial journalists scrambled to digest 140-odd pages of recommendations by two separate bodies covering similar ground, to figure out which questions to put to which Bailey in which room at which time. Inevitably they failed, and there was a lot of 'let me take off my x hat and put on my y hat' from Bailey, mopping the sweat from his brow and counting the burnt calories. Pantomime aside, there was much to glean from the lengthy reports. But perhaps the most salient detail was the one conspicuously missing: data. The two reports mention the word a combined 150 times, but mainly in reference to the data they lack – data they desperately need – rather than what they have. 'Unless you've got the data, you don't have line of sight, it's that simple,' as Bailey put it at one of the conferences (I forget which). 'Unless we can see the data and see the data across the market…I don't think anyone can say they fully understand the vulnerabilities that are there.' This uncertainty is especially acute in private markets, which have more than tripled in size globally over the past decade and now account for around 15 per cent of UK corporate debt. Unlike stocks, valuations of private market assets are not mark-to-market and take place much more infrequently, while private funds often borrow against the assets at those valuations. That conflict of interest, combined with a relative opacity and what the Bank calls a 'weakening in underwriting standards,' could pose problems. In the event of a downturn, private funds may have to sell off assets at a discount to meet debt repayments, which could trigger falling asset values, and a downward spiral. But how likely is it? The Bank says: 'Further work is needed to address the significant data gaps that hinder the ability of financial stability authorities to understand how private markets might operate after a shock, and how stress within private markets might interact with the wider financial system and potentially disrupt the UK real economy financing.' A less charitable reading: if private markets are on the brink of collapse, we haven't got a scooby. Nor do we know what they'll take down with them. None of this means a meltdown is imminent. As Bailey noted, there is nothing inherently wrong with the expansion of private equity and credit. But getting a handle on the state of play, and pronto, feels important. Maybe the Bank needs a Data Unit for Financial Underlying Stability to make it happen – but who will chair? Depends how much space is left on the hat stand, because the FSB set up a new taskforce to assess where it needs more data — and you can guess who's chairing that. There are few more gloomy financial reports than the OBR's on fiscal risks. Reading it brings even the most hardened government official to tears, let alone Rachel Reeves. OBR chair Richard Hughes was blunt about the situation's severity. The public finances are on an unsustainable path, he said, and it's his job to get politicians to talk about it. Take your pick of daunting prognoses offered up by the report: population ageing, birth rate declining, tax receipts sliding, debt levels soaring, climate catastrophe looming. Two details stood out for me. One was the huge role that productivity will play in determining the fate of the British state. Unexpectedly high productivity growth could 'substantially improve the outlook for public finances' over the coming decades. And lower than expected? Debt would reach 647 per cent of GDP. No, not a typo – we'd be bankrupt three times over. Surely therefore, productivity should be the sole focus of government to get its finances in shape. AI could be a game changer, the OBR says, but that's 'highly uncertain.' Another detail concerns the response to the scrapping of the non-dom regime. The OBR initially thought the move would bring in £13bn, but now? 'Higher earners' behavioural responses to tax changes are more uncertain and potentially higher than assumed in costings. A growing reliance on this small and mobile group of taxpayers therefore represents a fiscal risk.' Which sounds an awful lot like 'please, don't even attempt a wealth tax.' Or as tax guru Dan Neidle put it this week: 'We're left with the false claim that Other People will always pay.' Sign in to access your portfolio
Glasgow Times
09-07-2025
- Business
- Glasgow Times
UK workforce exposed if global trade war intensifies, Bank warns
Households and businesses nonetheless remain resilient, and the UK banking system is equipped to support them even if conditions significantly worsen, the Bank's Financial Policy Committee (FPC) said in its latest report. The FPC said there was a high degree of unpredictability about how global trade will evolve, with US President Donald Trump hiking tariff rates in April but negotiations with other countries over possible trade deals ongoing. Conflict in the Middle East has also raised the risk of energy prices spiking, particularly if the supply of oil and gas were disrupted, it found. This could particularly impact businesses that are more reliant on financing linked to global financial markets, which have faced turbulence in recent months. 'The potential for much higher trade tariffs increases the likelihood of corporate default in the most exposed sectors, and losses for their lenders,' the FPC's Financial Stability Report read. The outlook for the UK is weaker and more uncertain than it was in November, when the committee previously produced a report, it said. An escalating trade war could weigh on UK businesses should global consumer demand weaken, lending conditions tighten, or reduced availability of funding causes firms to slow down investment. 'Further shocks could particularly impact firms in sectors dependant on demand from the US market, such as manufacturing,' the report read. Governor of the Bank of England, Andrew Bailey, said a more fragmented global economy could be 'bad for employment' in the UK (Alastair Grant/PA) These sectors, as well as others like retail, are more vulnerable to a drop in consumer demand and are less able to recover earnings by raising prices. Analysis for the Bank suggests that firms in sectors likely to be more impacted by the global trade shock, either directly or indirectly, account for around 60% of UK employment. Governor Andrew Bailey, who leads the committee, said the Bank had been hearing from UK businesses delaying investment plans due to the more uncertain economic situation. He stressed that the central bank was having to 'watch very carefully' the link between 'uncertainty and caution in terms of investment'. He also recognised that a more fragmented global economy would negatively impact activity, which was therefore 'bad for employment'. However, the FPC concluded that despite pockets of vulnerability, UK businesses would typically be able to pay their debts even in the face of further global volatility such as lower demand and supply. Furthermore, the report found that the UK banking system has the capacity to support households and businesses even if economic and business conditions became substantially worse than expected. Meanwhile, the committee warned that intensifying geopolitical tensions could raise the risk of cyber attacks around the world. It said this was a 'global challenge' but that UK financial firms were generally prepared to deal with cyber incidents. Mr Bailey also weighed on reports that the Government was considering bringing new powers that force pension funds to invest more in UK assets, in order to help grow the economy. 'We've had a low level of pension fund investment in the economy and I think structural changes to the pension industry are helpful in this effect,' the Governor said. 'However, I do not support mandating, I don't think that's appropriate.' 'I think reforming the pensions industry does require a lot of heavy lifting but it needs to be done,' he said, but stressed that he hopes changes will be 'natural'.
South Wales Guardian
09-07-2025
- Business
- South Wales Guardian
UK workforce exposed if global trade war intensifies, Bank warns
Households and businesses nonetheless remain resilient, and the UK banking system is equipped to support them even if conditions significantly worsen, the Bank's Financial Policy Committee (FPC) said in its latest report. The FPC said there was a high degree of unpredictability about how global trade will evolve, with US President Donald Trump hiking tariff rates in April but negotiations with other countries over possible trade deals ongoing. Conflict in the Middle East has also raised the risk of energy prices spiking, particularly if the supply of oil and gas were disrupted, it found. This could particularly impact businesses that are more reliant on financing linked to global financial markets, which have faced turbulence in recent months. 'The potential for much higher trade tariffs increases the likelihood of corporate default in the most exposed sectors, and losses for their lenders,' the FPC's Financial Stability Report read. The outlook for the UK is weaker and more uncertain than it was in November, when the committee previously produced a report, it said. An escalating trade war could weigh on UK businesses should global consumer demand weaken, lending conditions tighten, or reduced availability of funding causes firms to slow down investment. 'Further shocks could particularly impact firms in sectors dependant on demand from the US market, such as manufacturing,' the report read. These sectors, as well as others like retail, are more vulnerable to a drop in consumer demand and are less able to recover earnings by raising prices. Analysis for the Bank suggests that firms in sectors likely to be more impacted by the global trade shock, either directly or indirectly, account for around 60% of UK employment. However, the FPC concluded that despite pockets of vulnerability, UK businesses would typically be able to pay their debts even in the face of further global volatility such as lower demand and supply. Furthermore, the report found that the UK banking system has the capacity to support households and businesses even if economic and business conditions became substantially worse than expected. Meanwhile, the committee warned that intensifying geopolitical tensions could raise the risk of cyber attacks around the world. It said this was a 'global challenge' but that UK financial firms were generally prepared to deal with cyber incidents.
Bloomberg
09-07-2025
- Business
- Bloomberg
BOE to Review Bank Capital Rules for First Time in Five Years
The Bank of England will review the overall level of capital requirements it sets for banks for the first time in five years after officials determined that lenders have largely been able to keep an adequate cushion against hard times for much of the past decade. The central bank will provide an update on that assessment in November, according to its twice-yearly Financial Stability Report published Wednesday. The Financial Policy Committee left the countercyclical buffer at 2% at its meeting on June 27.
