Bank of England shows cautious optimism on Financial Stability says KPMG

Commenting on The Financial Stability Report, Karim Haji, EMA and UK Head of Financial Services, KPMG, says:

“The Bank is cautiously optimistic, relaxing rules on dividend payments whilst also giving the green light for banks to use their capital buffers to the fullest extent if that’s what it takes to keep supporting UK businesses.  The decision to hold the countercyclical buffer ratio at 0% until 2021 - which with the implementation lag means the end of 2022 - will help ensure this remains a reality.

“After more than a decade of being told to build buffers, the instruction to use them has seemed a drastic shift but in reality, few banks have needed to make a dent in their reserves. The scale of banks’ capital supports the confidence demonstrated in today’s report, with UK banks remaining resilient to more drastic hits to the economy than those forecasts. That said, it seems notable that there is no warning of potential short-term inflation in today’s report, this could be overly optimistic given the many compounding pressures that remain in light of the pandemic and Brexit.

“The evidence of increased risk-taking in financial markets is clearly a significant concern to the Bank of England, which means firms need to ensure they have robust risk controls and governance around asset valuations and credit standards. The use of third party ‘critical’ technology providers is also firmly on the watch list and whilst it’s broadly recognised that a cross-sector, cross border approach is needed, the realities of achieving that will be challenging to say the least.”

-ends-

For further media information contact:

KPMG Media Relations:
Tel: +44 (0) 207 694 8773

Christina Bridge (Works Mon – Wed)
KPMG LLP
15 Canada Square
London
E14 5GL
Tel: +44 (0)7789 504905

Helen Jackson (works Wed – Fri)
KPMG LLP
2 Forbury Place, 33 Forbury Road, Reading, RG1 3AD
Tel: +44 (0)118 3731 479
Mobile: +44 (0)790 111 5649

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 21 offices across the UK with approximately 16,000 partners and staff.  The UK firm recorded a revenue of £2.3 billion in the year ended 30 September 2020.

KPMG is a global organisation of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 147 countries and territories and has more than 219,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.