The British banking sector is seeing an increase in impairments amid rising inflation and ensuing rate of interest hikes, in response to Bank of England Deputy Governor Sam Woods.
In a bid to tame runaway inflation, the central financial institution has hiked its major rate of interest from 0.1% in December 2021 to a 15-year excessive of 5.25% presently, and the market expects one other hike later this week to five.5%.
The economic system has confirmed surprisingly resilient, however Woods, additionally CEO of the Prudential Regulation Authority, mentioned regulators are intently monitoring potential stresses within the banking sector.
“So far things have worked out a bit better than many people expected and particularly through Covid of course, the huge fiscal and monetary support did actually shield the banking system from credit losses,” Woods informed CNBC on Tuesday.
“But as we’re looking at it now, we are actually seeing a pickup in impairments across the banking sector. It’s not one that people should be alarmed about.”
The PRA estimates that simply over 1% of mortgages are in arrears. Woods famous that quantity was equally excessive as just lately as 2018, and throughout the monetary disaster it was 3.6%.
“So it’s going up but from a very low base, and we’ve got a close eye on it,” he added.
This is a breaking information story, please test again later for extra.