LONDON, 12 December 2020, (TON): In the latest financial stability report December 2020, The Bank of England has said, “UK banks are well prepared for serious economic shocks and can continue to lend during the pandemic.”

With the start of the pandemic, considerable funds have been raised from the banks and the financial markets.

With the assistance of the government guarantees, the businesses have borrowed £80bn this year so far, compared to £20bn by this time in 2019.

There are the risks to the UK’s financial stability as presented by a no deal Brexit mitigated, it said. However, it warned that there are a number of risks ahead, including further disruption from COVID-19, and new transitional trading arrangements between the United Kingdom and the European Union. 

It said that the UK banks can manage credit loss in the order of £200bn, but it would involve incredibly severe shocks that were unlikely to occur.

There would be 15% rise in the unemployment and 30% fall in the house prices.

Banks resilience posed hope saying that the banks have high levels of capital. By protecting the economy, it is bank’s own interest to continue lending.

In March, the Financial Policy Committee (FPC) lowered the UK countercyclical capital buffer to 0-%, meaning that the banks have more capacity to lend.

FPC has confirmed that it expects to keep the capital buffer rate to 0% for at least another year, to help ensure banks plan for the future and support the economy.