Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Banks

US politics, bond yields and Brexit all test financial stability, says BoE

Posted on November 30, 2016

The result of the US election earlier this month has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging.

Vulnerabilities that were already considered “elevated” by the BoE have got worse since its last report on financial stability in July in the weeks following the UK’s vote to leave the European Union, the central bank said on Wednesday in its assessment of risks to the financial system.

The election of Donald Trump as US president has pushed up yields on sovereign bonds from advanced economies, while also weighing on expectations around global trade.

“The US election has reinforced existing vulnerabilities,” the BoE’s twice-yearly Financial Stability Report reads. “Following the US election, there have been significant changes in global asset prices. Expectations of expansionary US fiscal policy have contributed to an increase in advanced economy sovereign yields, reversing much or all of their falls observed earlier in the year.”

UK banks are particularly exposed to China, Hong Kong and emerging markets — around 20 per cent of UK banks’ total assets. The report highlighted the difficulty of emerging markets servicing their debts in the new environment.

Financial firms sharply pulling out of London because of Brexit could also threaten financial stability — both that of the UK and of Europe as a whole, the BoE added.

“If any such adjustments take place in a short timeframe, there could be a greater risk of disruption to services provided to the European real economy, which could spill back to the UK economy through trade and financial linkages,” the report reads.

The BoE also flagged risks from European banks — particularly Italian ones — which are suffering from various headwinds and have questions over the viability of their business models. The report also highlighted the various unresolved misconduct investigations hanging over European banks.

But despite the challenges the BoE considers the UK system to be strong enough; it is happy with the overall level of capital in the banking system following Wednesday’s publication of its stress tests — even though Royal Bank of Scotland failed and vulnerabilities were highlighted at Barclays and Standard Chartered.