CISI friend John Young, Agent for the North West spoke at Rathbone Hall on 14th December, for our Christmas CPD event.
Interest Rates
On the 2nd November, interest rates were raised to 0.50% in order to meet the inflation target while still supporting jobs and growth.
Overall, the committee’s growth forecast hasn’t changed much. But global growth remains strong and inflation is above target (3.1% in November) and more people are in work than ever before
What will be the impact of the rate increase?
A fifth of people with mortgages have never experienced an increase in Bank Rate. But half of these borrowed after the FPC introduced its affordability stress in 2014, which requires mortgagors to be able to withstand an increase in their mortgage rate to around 7%.
For companies, the share of profits required to meet monthly debt repayments has fallen to its lowest level for at least two decades. Company gearing is much lower than in the run up to the financial crisis.
Brexit
John advised that the FPC will continue to identify and monitor the UK financial stability risks associated with Brexit.
There are a range of possible outcomes for the UK’s future relationship with the EU and a number of possible paths to that relationship. The UK banking system can support the real economy through a wide range of Brexit outcomes. This includes a scenario in where there is no agreement in place when the UK leaves the EU.
Renewal of the RTGS system
Real-time gross settlement (RTGS) service - infrastructure that holds accounts for banks, building societies and other institutions.
On an average day, RTGS settles around £500 billion between banks. Renewal of the system will include higher resilience, wider interoperability and improved functionality
Stress Tests
John closed by discussing the 2017 stress test of UK banks. The stress test scenario allows for more severity than the financial crisis. Therefore no bank needs to strengthen its capital positon in response.
On behalf of all the Liverpool, Chester & North Wales committee, we wish all our members a very Merry Christmas and all the best for 2018!
