This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/live/2017/jun/27/bank-of-england-financial-stability-draghi-ecb-google-fine-europe-janet-yellen-business-live
The article has changed 15 times. There is an RSS feed of changes available.
| Version 7 | Version 8 |
|---|---|
| Bank of England tells banks to raise more capital as consumer credit fears grow - business live | Bank of England tells banks to raise more capital as consumer credit fears grow - business live |
| (35 minutes later) | |
| 12.35pm BST | |
| 12:35 | |
| If you’re just tuning in, here’s Jill Treanor’s story about the Bank of England’s financial stability report: | |
| 12.24pm BST | 12.24pm BST |
| 12:24 | 12:24 |
| Final question: | Final question: |
| Q: You say you expect to raise the counter-cyclical buffer to 1% in November, but could Brexit force a cut back from 0.5% to 0% (reversing today’s move) | Q: You say you expect to raise the counter-cyclical buffer to 1% in November, but could Brexit force a cut back from 0.5% to 0% (reversing today’s move) |
| Mark Carney says the BoE thinks the buffer should be around 1% in stable times. The BoE had started the process of raising the buffer last year, before the Brexit vote, which led it to be cut back to 0% to take worries about lending ‘off the table’. | Mark Carney says the BoE thinks the buffer should be around 1% in stable times. The BoE had started the process of raising the buffer last year, before the Brexit vote, which led it to be cut back to 0% to take worries about lending ‘off the table’. |
| So.... we could have decided to hike the buffer to 1% today, but it was more sensible to allow a ‘gradual build’ (to 0.5% today, and 1% in November) | So.... we could have decided to hike the buffer to 1% today, but it was more sensible to allow a ‘gradual build’ (to 0.5% today, and 1% in November) |
| On Brexit, we want the system to be as resilient as possible to prepare for any outcome in 640 days time, he concludes. | On Brexit, we want the system to be as resilient as possible to prepare for any outcome in 640 days time, he concludes. |
| I think that means the BoE want the banking sector to be well capitalised, in case of any Brexit shock in March 2019, when Britain leaves the EU. | I think that means the BoE want the banking sector to be well capitalised, in case of any Brexit shock in March 2019, when Britain leaves the EU. |
| Updated | Updated |
| at 12.31pm BST | at 12.31pm BST |
| 12.17pm BST | 12.17pm BST |
| 12:17 | 12:17 |
| Q: You say that West End asset prices are ‘unsustainable’; when might they return to reality, and what impact would that happen? | Q: You say that West End asset prices are ‘unsustainable’; when might they return to reality, and what impact would that happen? |
| Carney reiterates his earlier point that Britain currently have “Very low risk-free rates, and high valuation levels”. So either those rates should rise, or asset prices should fall. | Carney reiterates his earlier point that Britain currently have “Very low risk-free rates, and high valuation levels”. So either those rates should rise, or asset prices should fall. |
| It would be foolish to put a timescale on it - prices can stay unsustainable for a long time, and then correct quickly, he warns. | It would be foolish to put a timescale on it - prices can stay unsustainable for a long time, and then correct quickly, he warns. |
| 12.15pm BST | 12.15pm BST |
| 12:15 | 12:15 |
| Carney: We've had very productive discussions with US regulators | Carney: We've had very productive discussions with US regulators |
| Q: The report talks about the need for ‘consistent implementation’ of international standards; are you particularly worried about the Trump administration? | Q: The report talks about the need for ‘consistent implementation’ of international standards; are you particularly worried about the Trump administration? |
| Carney says it is important to have open global standards, and even more important that they are implemented, to avoid another financial crisis. | Carney says it is important to have open global standards, and even more important that they are implemented, to avoid another financial crisis. |
| You also need supervisory co-operation between regulators...and we want to reinforce that where possible. | You also need supervisory co-operation between regulators...and we want to reinforce that where possible. |
| On the US, we have had “very productive discussions” with regulators about it. | On the US, we have had “very productive discussions” with regulators about it. |
| Carney explains how many countries have some unique rules (such as America’s Volcker rule, or bank ring-fencing in the UK), which they can change without affecting other nations. But there needs to be more co-ordination when it comes to global standards, if there are areas of ‘inconsistency’ that need to be addressed. | Carney explains how many countries have some unique rules (such as America’s Volcker rule, or bank ring-fencing in the UK), which they can change without affecting other nations. But there needs to be more co-ordination when it comes to global standards, if there are areas of ‘inconsistency’ that need to be addressed. |
| [Explainer: Donald Trump has vowed to cut regulations in the financial sector, such as the Volcker rule which is meant to prevent banks taking dangerous trading risks. | [Explainer: Donald Trump has vowed to cut regulations in the financial sector, such as the Volcker rule which is meant to prevent banks taking dangerous trading risks. |
| Trump is also keen to repeal Dodd-Frank, which was brought in after the financial crisis. ] | Trump is also keen to repeal Dodd-Frank, which was brought in after the financial crisis. ] |
| 12.02pm BST | 12.02pm BST |
| 12:02 | 12:02 |
| Q: You point out that commercial real estate assets are overvalued, and could unwind if people try to sell them in a rush. That happened after the Brexit vote - has anything changed since? | Q: You point out that commercial real estate assets are overvalued, and could unwind if people try to sell them in a rush. That happened after the Brexit vote - has anything changed since? |
| [explainer: several property funds froze redemptions after the EU referendum, to stop investors cashing out, exposing the dangers of investing in ‘illiquid assets’ such as shopping centres] | [explainer: several property funds froze redemptions after the EU referendum, to stop investors cashing out, exposing the dangers of investing in ‘illiquid assets’ such as shopping centres] |
| Carney says there is a disconnect between the market expectations for future growth, and the value of commercial buildings. | Carney says there is a disconnect between the market expectations for future growth, and the value of commercial buildings. |
| So either those expectations will rise, or commercial asset values will fall. | So either those expectations will rise, or commercial asset values will fall. |
| Carney offering coded warning on the value of commercial real estate. Disconnect between growth expectations and asset values. | Carney offering coded warning on the value of commercial real estate. Disconnect between growth expectations and asset values. |
| 11.55am BST | 11.55am BST |
| 11:55 | 11:55 |
| Q: Isn’t the boom in consumer credit due to you keeping interest rates so low? | Q: Isn’t the boom in consumer credit due to you keeping interest rates so low? |
| Carney insists he’s not to blame, and points to the broader context of a UK economy that has grown solidly over the last 12 months (despite slowing in the first quarter of 2017). | Carney insists he’s not to blame, and points to the broader context of a UK economy that has grown solidly over the last 12 months (despite slowing in the first quarter of 2017). |
| Here’s a chart showing how consumer debt has grown: | Here’s a chart showing how consumer debt has grown: |
| Consumer credit growing much faster than household incomes @bankofengland #Carney #FinancialStabilityReport pic.twitter.com/9wg6T9ueNS | Consumer credit growing much faster than household incomes @bankofengland #Carney #FinancialStabilityReport pic.twitter.com/9wg6T9ueNS |
| 11.52am BST | 11.52am BST |
| 11:52 | 11:52 |
| Carney says the boom in car loans is a major factor behind the pick-up in consumer debt recently, but he remains “sanguine” about the banking sector’s overall exposure to it. | Carney says the boom in car loans is a major factor behind the pick-up in consumer debt recently, but he remains “sanguine” about the banking sector’s overall exposure to it. |
| Carney: much of UK pick up in debt related to car loans | Carney: much of UK pick up in debt related to car loans |
| 11.49am BST | 11.49am BST |
| 11:49 | 11:49 |
| BoE: Now's the time to check consumer credit | BoE: Now's the time to check consumer credit |
| Q: Your charts show that consumer finance has been growing faster than household income since 2014, so shouldn’t you have issued today’s warning sooner? | Q: Your charts show that consumer finance has been growing faster than household income since 2014, so shouldn’t you have issued today’s warning sooner? |
| Deputy governor Sir John Cunliffe says consumer borrowing actually picked up in 2013, but overall household lending actually grew slower than the UK economy. | Deputy governor Sir John Cunliffe says consumer borrowing actually picked up in 2013, but overall household lending actually grew slower than the UK economy. |
| Consumer borrowing is £200bn, compared to £1.4 trillion in mortgage lending, he explains - so the BoE has to decide when it’s a serious worry. | Consumer borrowing is £200bn, compared to £1.4 trillion in mortgage lending, he explains - so the BoE has to decide when it’s a serious worry. |
| We’ve been watching consumer credit for a while, and now is the time to look at whether underwriting standards are starting to slip, and bring forwards our stress test (by three months, to September) | We’ve been watching consumer credit for a while, and now is the time to look at whether underwriting standards are starting to slip, and bring forwards our stress test (by three months, to September) |
| 11.45am BST | 11.45am BST |
| 11:45 | 11:45 |
| Q: Are banks misbehaving and gaming the system, and is there a cultural problem? | Q: Are banks misbehaving and gaming the system, and is there a cultural problem? |
| They’re not gaming the system, but they’re not learning the lessons of the past, Carney says. | They’re not gaming the system, but they’re not learning the lessons of the past, Carney says. |
| Updated | Updated |
| at 11.54am BST | at 11.54am BST |
| 11.44am BST | 11.44am BST |
| 11:44 | 11:44 |
| Q: Which consumer borrowing are you most worried about? | Q: Which consumer borrowing are you most worried about? |
| Carney cites the sharp build up in car financing – both in volume, and the move towards ‘personal contract purchasing’ deals (where buyers pay monthly repayments, and then face a large balloon payment to actually own their car) | Carney cites the sharp build up in car financing – both in volume, and the move towards ‘personal contract purchasing’ deals (where buyers pay monthly repayments, and then face a large balloon payment to actually own their car) |
| Q: How confident are you that banks can raise the extra capital you are demanding? | Q: How confident are you that banks can raise the extra capital you are demanding? |
| They all have this capital on their books at present, Carney replies. It’s a question of reallocating capital from other areas (and perhaps choosing to raise more capital) | They all have this capital on their books at present, Carney replies. It’s a question of reallocating capital from other areas (and perhaps choosing to raise more capital) |
| The extra capital buffer will mean UK banks must meet a 4% leverage ratio, Carney explains, but the current leverage ratio is actually 5.25%. | The extra capital buffer will mean UK banks must meet a 4% leverage ratio, Carney explains, but the current leverage ratio is actually 5.25%. |
| In other words, Banks shouldn’t face a massive challenge meeting the BoE’s demands. | In other words, Banks shouldn’t face a massive challenge meeting the BoE’s demands. |
| Carney: at most including extra capital buffer demanded takes demands on UK banks to 4% leverage ratio. Less than current. (ie did nothing!) | Carney: at most including extra capital buffer demanded takes demands on UK banks to 4% leverage ratio. Less than current. (ie did nothing!) |
| Updated | Updated |
| at 11.54am BST | at 11.54am BST |