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By Huw Jones
LONDON, March 24 (Reuters) - The shock from coronavirus to
banks is set to be greater but less prolonged than lenders faced
in last year's stress test and the financial system remains
resilient, the Bank of England said on Tuesday.
"Major UK banks are well able to withstand severe market and
economic disruption," the BoE's Financial Policy Committee said
in a statement from meetings it held on March 9 and March 19.
The FPC had already announced that banks can use the capital
they hold in their counter cyclical capital buffers (CCYB) to
support lending worth up to 190 billion pounds and it indicated
on Tuesday that banks could go further if needed.
"The cut in the CCyB reinforced the FPC’s expectation that
all elements of the substantial capital and liquidity buffers
that have been built up by banks could be drawn on, as necessary
to support the economy," the FPC said.
"The FPC would monitor closely the response of banks to
these measures as well as the credit conditions faced by UK
businesses and households more generally," it said.
The main capital buffer of top UK lenders is around 17.5% of
capital to risk-weighted assets, more than three times higher
than before the financial crisis a decade ago when taxpayers had
to bail out lenders.
They also hold a trillion pounds of high-quality liquid
assets, such as cash and bonds, to fund themselves for many
months, the FPC said.
Households and companies in Britain also had considerable
undrawn facilities at around 140 billion pounds and 260 billion
pounds respectively, the FPC said.
The FPC has cancelled this year's stress test but said it
would continue to monitor whether banks are holding enough
capital.
"The FPC would need to form a view about the resilience of
the banking system throughout 2020 to provide reassurance and
inform further policy action," the minutes said.
The FPC will use a mix of the banks' own in-house stress
testing and desk-based analysis at the BoE.
(Reporting by Huw Jones; Editing by Catherine Evans)
