Bank of England Stress Tests Results Revealed
Bank of England Stress Tests Results Revealed
The Bank of England (BoE) has revealed the results of its stress testing on the UK banking system. It plans to take action to cool the buy-to-let sector, as the market continues to grow.
The BoE has also informed UK banks that they could be forced to hold up to £10 billion of capital ahead of a potential economic downturn.
The stress tests were designed to measure how banks would deal with another financial crisis. The BoE reports that Standard Chartered and the Royal Bank of Scotland (RBS) are in the weakest financial positions.
It believes that both would have been unable to endure a shock to the financial system had they not already taken action to strengthen their financial position over the year.
For months, the BoE has raised concerns over the buy-to-let mortgage market. Although it has not taken immediate action to cool this sector, it announced that it is reviewing the lending criteria used by firms and is “ready to take action”.
It will also observe the impact of the extra 3% Stamp Duty imposed on buy-to-let landlords, as announced by Chancellor George Osborne in last week’s Autumn Statement.
The buy-to-let sector has experienced “rapid growth” recently, with lending rising 10% in the first nine months of 2015.
It is expected that changes to landlord taxes, including the reduction in buy-to-let mortgage interest tax relief from April 2017, will cause some investors to leave the market altogether or sell some of their properties. The additional Stamp Duty may also cool the market.
Read the Bank’s complete stress tests results here: http://www.bankofengland.co.uk/financialstability/Documents/fpc/results011215.pd
How do you think the buy-to-let sector will change in the short term and further into the future?