The UK Monetary Policy Committee has published the Monetary Policy Summary and Record of its 11 June 2024 FPC meeting, as well as its Financial Stability Report for June. The FPC considers the overall risk environment to be broadly unchanged from the first quarter. Markets continue to price in a mostly benign medium-term outlook, with some risk premiums tightening further, even as the global risk environment faces several challenges. Some of these challenges have become more concerning and imminent.
Financial policy summaries and records cover a variety of topics, including:
Private equity. The FPC notes that greater transparency around valuation practices and overall levels of leverage will help reduce the sector’s vulnerabilities. Risk management practices in parts of the sector, including lenders to the sector such as banks, also need to improve. The FPC will consider the outcome of regulatory work by the Financial Conduct Authority and the Prudential Regulation Authority to address some of these issues. Resilience of the UK banking sector. The FPC believes that the UK banking system has the capacity to support households and businesses even if economic and financial conditions deteriorate significantly more than expected. However, it also notes that there are a number of system-wide factors that may affect bank funding and liquidity over the next few years. It is therefore important that banks incorporate these system-wide trends into their liquidity management and forward planning for the coming years. UK countercyclical capital buffer rate. The FPC is maintaining the UK CcyB rate at its neutral setting of 2%. Liability-driven investment funds. Given the significant progress made by domestic and international authorities over the past 18 months on the resilience of LDI funds, the FPC has concluded its November 2022 and March 2023 recommendations on the resilience of LDI funds.
[View source.]
