BoE Health Check on the UK Economy

The Bank of England has released its latest health check on the stability (or otherwise) of the UK financial system.

Without a recovery in financial sector balance sheets and a return of an appetite to lend and unfreeze the supply of credit, any recovery will be delayed and weak.

Banks continue to de-leverage aggressively and I have met several owners of profitable and well managed smaller businesses in recent weeks who have complained that their banks are getting in touch directly to change the conditions of their credit facilities. In some cases the banks are adding 1 or 2 per cent to the rates charged for overdrafts and loans - which themselves are already a high multiple of the policy interest rate. It is the banking equivalent of the rip-off extra charges for people flying with the lower-cost airlines.

The Financial Times has a snappy slide-show drawing on some of the Bank’s own charts - this can be found here although it may only be available to FT subscribers. The Bank’s Financial Stability Report can be accessed here. And here is a BBC news article on the report.