BOE Financial Stability Report now out 27 June

  • will tighten mortgage affordability tests for lenders
  • corp bonds, commercial property vulnerable to re-pricing
  • plans to raise banks' minimum leverage ratio requirement to 3.25% of exposures ex CB reserves from 3%
  • countercyclical buffer up to 0.5%
  • BOE plans to raise capital buffer to 1% in Nov

Says the FPC:

"To ensure that the financial system has the resilience it needs, the FPC is: • Increasing the UK countercyclical capital buffer rate to 0.5%, from 0%. Absent a material change in the outlook, and consistent with its stated policy for a standard risk environment and of moving gradually, the FPC expects to increase the rate to 1% at its November meeting.

• Bringing forward the assessment of stressed losses on consumer credit lending in the Bank's 2017 annual stress test. This will inform the FPC's assessment at its next meeting of any additional resilience required in aggregate against this lending.

The FPC further supports the intentions of the Prudential Regulation Authority and Financial Conduct Authority to publish, in July, their expectations of lenders in the consumer credit market.

• Clarifying its existing insurance measures in the mortgage market, designed to prevent excessive growth in the number of highly indebted households. This will promote consistency across lenders in their application of tests to assess whether new mortgage borrowers can afford repayments.

• Consistent with its previous commitment, restoring the level of resilience delivered by its leverage ratio standard to the level it delivered in July 2016 before the FPC excluded central bank reserves from the leverage ratio exposure measure. The FPC intends to set the minimum leverage requirement at 3.25% of non-reserve exposures, subject to consultation. • Overseeing contingency planning to mitigate risks to financial stability as the United Kingdom withdraws from the European Union.

• Building on the programme of cyber resilience testing it instigated in 2013, by setting out the essential elements of the regulatory framework for maintaining cyber resilience. It will now monitor that each element is being fulfilled by the relevant UK authorities.

Full report here

GBPUSD back to 1.2755 after quick spike to 1.2774 on the capital requirements rise and general tightening tones for households as I forewarned in my preview.

Presser live here at 10.00 GMT will offer further volatility. Still range trading overall so take your pick. Buy low or sell high. Or both!

GBPUSD 60m