The Bank of England warned on Tuesday that the economic outlook for the UK and the world has worsened since the start of the year and told banks to increase their capital buffers so they can weather the storm.
“The global economic outlook has deteriorated sharply. Global financial conditions as a whole have tightened significantly,” Bank of England Governor Andrew Bailey said at a press conference after the British central bank released its semi-annual Financial Stability Report.
The Bank added that developments related to the war in Ukraine will also be an important issue.
The central bank said British lenders are well positioned to weather even a serious economic downturn, but capital ratios – still strong – could drop slightly in the coming quarters.
The Central Bank also expressed its discomfort with the health of major financial markets. “Amid high volatility, liquidity conditions have worsened even in generally highly liquid markets such as Treasury bills, gold and interest rate futures,” said the Bank of England.
He said major UK markets – while still functional – are becoming more expensive, with short-term gilded (UK government bond) bid spreads more than double the 2021 average.
“(Conditions) could continue to deteriorate, especially if market volatility increases further,” the BoE said.
source: Noticias
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