This article is from the source 'bbc' 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 http://www.bbc.co.uk/news/business-23061790

The article has changed 3 times. There is an RSS feed of changes available.

Version 0 Version 1
Bank of England warns on risk from interest rate rises Bank of England warns on risk from interest rate rises
(about 1 hour later)
The Bank of England has warned that consumers, as well as financial institutions, could be vulnerable to any rise in interest rates. The Bank of England has warned that "significant" numbers of people could face financial problems when interest rates start to rise again.
Paul Tucker, the deputy governor, has asked regulators to investigate the issue immediately. Paul Tucker, the Bank's deputy governor, has asked regulators to investigate the issue immediately.
The Bank says that "significant cohorts of UK borrowers could experience financial difficulties", if rates were to rise.
The Bank's base rate has remained at a record low of 0.5% since March 2009.The Bank's base rate has remained at a record low of 0.5% since March 2009.
If interest rates were to rise by 1%, the Bank said that households accounting for 9% of mortgage debt would need to take some kind of action. If rates rose by one percentage point, to 1.5%, the Bank said households accounting for 9% of mortgage debt would need to take action.
That could include earning more, working longer hours, or cutting essential spending.That could include earning more, working longer hours, or cutting essential spending.
If rates were to rise by 2%, that figure would rise to 20% of mortgage debt. If rates were to rise by two percentage points, to 2.5%, that figure would rise to 20% of mortgage debt.
The Bank's Financial Stability Report said: "Significant cohorts of UK borrowers could experience financial difficulties", if rates were to rise.
However, on Tuesday, in his last public appearance as Bank of England governor, Sir Mervin King suggested it would be a long time before interest rates increased.
He said world economies were nowhere near a return to "normal" interest rates.
City economists currently expect a rise in rates in about two years' time.
Philip Shaw at Investec said the UK base rate would probably go up to 0.75% in the spring of 2015.
Stability threat?Stability threat?
Mr Tucker also warned about a danger to banks. He said there had been a "progressive search for yield", as institutions hunted for better returns. Mr Tucker also warned that rate rises could also threaten banks. He said there had been a "progressive search for yield", as institutions hunted for better returns.
He warned that the authorities "need to be alert to whether stability could be threatened by excessive leverage or liquidity risk building up in any potentially vulnerable parts of the financial system".He warned that the authorities "need to be alert to whether stability could be threatened by excessive leverage or liquidity risk building up in any potentially vulnerable parts of the financial system".
The dangers had been underlined by the sharp fall in share prices over recent weeks, he added.The dangers had been underlined by the sharp fall in share prices over recent weeks, he added.
Mr Tucker made his remarks at the launch of the Bank of England's latest Financial Stability Report.Mr Tucker made his remarks at the launch of the Bank of England's latest Financial Stability Report.
He went on to say that regulators including the Financial Conduct Authority (FCA) should study how vulnerable borrowers and financial institutions might be to "sharp upward movements" in long-term interest rates.He went on to say that regulators including the Financial Conduct Authority (FCA) should study how vulnerable borrowers and financial institutions might be to "sharp upward movements" in long-term interest rates.
The FCA and the Prudential Regulation Authority (PRA) should report back by September this year, he said.The FCA and the Prudential Regulation Authority (PRA) should report back by September this year, he said.
Cyber Cyber attacks
Today's report also highlights the problems of cyber attacks on the banking system. The Bank's stability report also highlighted the problems of cyber attacks on the banking system.
Paul Tucker called for greater efforts by the industry to tackle the problem. Mr Tucker called for greater efforts by the industry to tackle the problem.
He said HM Treasury, working alongside regulators, should improve resistance to hackers, and start a programme to test banks' resilience to cyber attacks.He said HM Treasury, working alongside regulators, should improve resistance to hackers, and start a programme to test banks' resilience to cyber attacks.