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BoE says UK “significantly” more financially stable

The Bank of England says the UK’s financial system has been “significantly more stable” over the past six months.

The BoE’s financial stability report released today says that the authorities’ sustained support for the banking system and monetary policy measures have underpinned this recovery.

The Bank says low risk-free interest rates and reduced uncertainty have led to a rebound in a range of asset prices.

The market rally has boosted bank profits, lowered concerns about potential future losses and has enabled banks to raise further external capital.

The report says that while the profitability of banks is relatively buoyant and market conditions broadly favourable, banks should strengthen their balance sheets by not distributing an excessive amount of profit.

It says: “In the medium term, the root causes of this and previous systemic crises must be tackled — excessive risk-taking in the upswing of the credit cycle and insufficient resilience in the subsequent downturn.

“An expectation that ‘too important to fail’ firms will receive public assistance, and that unsecured wholesale creditors will not share losses, has exacerbated both the boom and the bust. That calls for a robust, multi-faceted policy response.

“Regulatory policies should give greater emphasis to systemic risks over the cycle and across institutions, as set out in a recent Bank discussion paper. They should be complemented by structural measures to contain the spread of risk across the system. And because failures of financial institutions cannot and should not be prevented, the resolution framework will need to be improved to limit the impact on the wider economy.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. UK are borrowing billions and so far I have not seen at what rate of interest it is being repaid at and what time period? Have I missed it or is it a secret?

  2. Heaven know what kind of state we would have been in if Messrs Cameron and Osborne had been making the decisions.

    Agreed we would have less debt. However, we would also be on the verge of being a 3rd world country and the recovery would take decades.

    I’m no great of the current goverment but am grateful they had the huevos to make a decision that saved the country from ruin.

  3. To anon. 18th Dec.

    Speculating what may have happened if the may players had been different is just that, pure speculation.

    Had Messrs Cameron and Osborne had the same information and data available to them as was available to Brown and Darling then they may well have had an even better response that the current incumbents. Perhaps Lloyds would have taken over Northern Rock and thus prevented the first run on a UK bank for 120+ years. Who knows?
    What we do know is that the ‘regulatory’ system put in place by Gordon Brown was ultimately found wanting, so if the BoE had still been in charge what then? Again who knows?

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