The July Financial Stability Report from the BoE says that the financial system overall remains resilient, as do UK households and businesses, with strength in the banking system to support any times of stress. It also notes that the market create the risk for multiple vulnerabilities to trigger at the same time, with some risks growing, and that rapid advances in and differing access to AI capabilities have combined to increase cyber and operational resilience risks.
So, in general, the same risks remain as have been identified for some time, with some becoming more pronounced. The report calls out the unprecedented surge in the use of AI, but uncertainty about what the consequences of the increased use will be. So, while there is a chance that a number of these already heightened risks might crystallise together, the bank capital framework means there is resilience within the sector to deal with it. Upcoming changes to modernise the bank capital framework will help to make it simpler, more effective, more proportionate and better calibrated to the risks while maintaining that resilience.
The Financial Policy Committee decided at its meeting on 26 June to maintain the CCyB rate at 2%.
The BoE has also published a summary of the background to and next steps in modernising the bank capital framework.