UK banks are emerging from the pandemic shock in good health and are able to meet the needs of consumers and companies as the economy recovers, the Bank of England (BoE) has said.
In its latest update on the health of Britain’s financial system, the BoE says banks have been “resilient”.
But while the economic outlook has improved, risks remain, especially from the spread of Covid, the report says.
Households and firms will continue to need loan support from banks, it adds.
The Financial Stability Report, published twice a year to provide a snapshot of the financial system and assess risks, says banks are in a good position to provide that support.
This will be especially important as government support schemes are unwound, with furlough ending in September and emergency business loans becoming due.
The BoE flagged risks in the report, warning about the build up of debt during the pandemic among small businesses. Corporate “debt vulnerabilities” have increased modestly, but more substantially among smaller firms, the report says.
The BoE also announced that, given the health of the system, it was removing pandemic-era curbs on dividends from HSBC, Barclays and other top lenders with immediate effect on Tuesday. The report said its stress test showed the sector was well capitalised to cope with a return to dividend payments.
