The Bank of England (BOE) plans to increase capital requirements for British lenders by £11.4 billion (US$14.5 billion) to tackle risks posed by rapid growth in consumer credit and to prepare for the uncertain outcome of Brexit talks.
The central bank set the countercyclical capital buffer at 0.5 percent of risk-weighted assets for British loans effective in June next year, and if nothing material changes the it plans to increase the level again to 1 percent in November next year.
Additionally, next month regulators are to publish new guidelines for consumer lending to ensure risks are priced and managed appropriately.
“We want to move the levels of capital back up to the level they should be — any time you move into more benign credit conditions there have been fewer defaults,” which can lead to complacency, BOE Governor Mark Carney said yesterday.
Regarding Brexit, “there are risks around that process, so contingency planning needs to be not only put in place, but also activated,” he added.
Each increase of 0.5 percent is to swell banks’ cushion of common equity Tier 1, the highest-quality capital, by £5.7 billion, according to the central bank’s Financial Stability Report. It opted for a staggered approach because it is less likely to result in banks tightening lending in response.
“It is a sensible way for the bank to try to take some of the steam out of the consumer debt growth without immediately impacting the nominal rates paid by mortgage borrowers,” Edinburgh-based Baillie Gifford & Co investment manager Gregory Turnbull Schwartz said. “It’s more targeted than a general base rate hit and more easily reversed should they see the need to do that in the near term.”
The countercyclical capital buffer is meant to guard against banks’ tendency to boost lending in boom times and slash it in a bust, potentially exacerbating a slowdown. The regulation is meant to ensure banks have enough capital to weather losses and continue making loans to support the economy.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last