This is not one of those financial services blog posts that claims any one single hot topic is going to lead to another international economic crisis. We all know the modern economy is extremely complex, and there are a wide variety of factors that would be involved if we saw another serious sudden downturn. What I want to discuss is one factor that I think a lot of people in the industry are talking about more lately, something that I think we’re all finally taking seriously and investing in.
Last month, the Bank of England’s Financial Policy Committee made some announcements on how they were working to ensure the resilience of the overall British financial systems. Two of their plans that particularly caught my eye were first, bringing forward the assessment of stressed losses on consumer credit lending and second, increasing the UK countercyclical capital buffer rate from 0% to 0.5%. That change to the countercylical capital buffer rate follows on the heels of other recent increases to the amount of capital institutions are already required to hold.
This clear signal the BoE is taking liquidity issues more seriously than ever is something I’ve seen mirrored in my own work, with a steady increase in the number of requests for Liquidity Risks and Treasury Risk professionals from my clients across the year so far. I think a key driving factor here is the recent rapid rise in consumer lending, alongside caution around the worst possible effects of the Brexit process.
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