Tumbling oil prices could expose the financial markets to geopolitical risk, create problems in the junk bond market and cause deflation, the Bank of England has warned.
Plunging oil prices are starting to feed through to UK consumers’ pockets after inflation fell to just 1% for the first time in 12 years last month.
Three banks – the Co-operative Bank, Lloyds Banking Group and Royal Bank of Scotland – were found to be lacking financial strength by the Bank of England after being subjected to tests designed to measure their ability to withstand economic shocks.
To test the resilience of the financial sector, the Bank of England created a hypothetical scenario in which economic growth plunges, the housing market crashes, and inflation and unemployment soar.
House prices fall by an unprecedented 35% and base rates jump above 4%, putting pressure on household finances already feeling the pain of falling real incomes. Unemployment doubles to 12% and inflation rockets in an economy being buffeted by a sharp drop in the value of the pound.
Plans are to be drawn up to give more confidence about the way banks measure their financial strength in the wake of the 2008 crisis.
Policymakers at the Bank of England will reduce their number of interest rate decisions to eight a year from 12 as part of a radical overhaul of processes at the 320-year old institution.
A Bank of England policymaker has argued that pay growth may be at a “turning point”, strengthening the case for higher interest rates.
The Bank of England has warned half a million families would be at risk of falling into mortgage arrears once it started to raise interest rates from their emergency level of 0.5%.
The price of peace at BG Group is £1.4m. That’s the difference between the face value of incoming chief executive Helge Lund’s original golden hello (£12m) and the rejigged version (£10.6m).
Mark Carney is right: in the great quest to improve bankers’ behaviour and stop the scandals, large fines for banks are not achieving much. He’s also correct when he says it’s not a case of a few rotten apples. We’ve had PPI, Libor, forex and all the rest. The problem is probably the barrels.
There should be more international cooperation on money laundering rules to stop banking services being withdrawn from emerging economies, according to the UK’s most senior banking regulator.
The Bank of England has warned of “deep-rooted problems” in the City that are undermining public trust in the financial system, as it launched a sweeping review intended to wipe out market manipulation.