Top of the FPC’s watch list is the consumer credit trend in the UK whose growth has far outpaced that of household income over the past year.
Brexit also remains a chief concern, with Carney reiterating that the BoE plans to rigorously stress test the banks to ensure the system is tough enough to absorb the severest of shocks.
Though the update from the BoE contained some good news, Old Mutual Global Investors financial analyst Rob James found the increase of the countercyclical capital buffer to be “mainly a symbolic” one.
“Banks are managing their capital levels today with a view to the normal ‘through the cycle’ level of buffer of 1%,” he said.
“Nevertheless, it sends a signal that the authorities are watching the volume and quality of lending very closely, which can be no bad thing.
“The 2017 stress test will examine the stressed behaviour of consumer lending to inform whether any further action is warranted.”
Still, like Draghi, Carney was also positive about the “resilience of the UK financial system.”
“The resilience of the UK financial system has strengthened significantly since the crisis,” he remarked.
“As a result, it has demonstrated its ability to dampen, rather than amplify, the impact of shocks on the real economy.
“As the UK moves into a more standard risk environment and embarks on the Brexit process with its attendant tail risks, the FPC is committed to ensure that the system continues to have sufficient resilience to withstand potential shocks.”
