British banks highly vulnerable to future shocks, Bank of England warns – Telegraph

Via British banks highly vulnerable to future shocks, Bank of England warns – Telegraph:

Britain’s banks remain over-indebted, highly vulnerable and harbour growing funding gaps which leave them susceptible to future shocks, the Bank of England has said.

In a sign of the strain facing nations’ public finances – including the UK’s – the report also revealed that the threat of a sovereign debt default has become one of the biggest concerns for investors. A survey put together for the report identified sovereign risk as a financial stability concern for the first time.

The report also laid out a number of key criteria banks will have to fulfil in the future – reforms which could transform the structure of the financial system. Among its recommendations were that in future banks should “face a credible threat of closure or wind down”, should have a “risk-based, pre-funded deposit insurance system”, should increase their levels of capital and liquidity, depending on their size, and should provide a “will” which explains how to dismantle them in the event of insolvency.

The Bank of England’s Financial Stability Report is available here.

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