Santander UK has passed the toughest stress tests since the 2008 financial crisis. The UK banking system is well capitalized and maintains large liquidity reserves. However, households and companies are under pressure due to the increase in interest rates, as indicated by the Bank of England on Wednesday and collected by Efe.
The quality of the entities’ assets is relatively solid, and the highest interest rates -they are at 5%- have had a limited impact on credit risk, according to a report by the Financial Policy Committee of the English issuing bank.
However, the risk environment is challenging, considering that some forms of lending, such as to finance commercial real estate investments or to buy a home to rent, are more exposed to loss as borrowing costs rise, adds the entity
Last June, the Bank of England raised interest rates by half a point, from 4.5 to 5 percent, the highest level since 2008, to control annual inflation in the United Kingdom, which is at 8.7 %. The bank added that the profitability of major UK banks has warned, allowing them to enhance capital and support their customers, while smaller lenders are also well capitalised.
Households with high debts increase
The proportion of households with high debts has warned -he adds- and it is expected to continue its rise this year, but it is estimated that it will remain below the historical peak reached in 2007.
Until now, the UK economy has been resilient to the risk of rising interest rates, but it will take time for the impact to be seen. As highlighted by the aforementioned committee, the global economic outlook is quite “uncertain” and interest rates around the world have warned about the decision of central banks to take measures to control the rise in inflation.
