The Financial Policy Committee (FPC) prepares and publishes a Financial Stability Report (FSR) twice per calendar year. The FSR sets out the FPC’s assessment of the outlook for financial stability in the United Kingdom. To do this, the FPC identifies the risks faced by the UK financial system and weighs them against the resilience of the system.
As is often the case in a standard environment, there are pockets of risk that warrant vigilance. Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. Lenders may be placing undue weight on the recent performance of loans in benign conditions.
Exit negotiations between the United Kingdom and the European Union have begun. There are a range of possible outcomes for, and paths to, the United Kingdom’s withdrawal from the EU.
Some possible global risks have not crystallised, though financial vulnerabilities in China remain pronounced. Measures of market volatility and the valuation of some assets — such as corporate bonds and UK commercial real estate — do not appear to reflect fully the downside risks that are implied by very low long-term interest rates.
To ensure that the financial system has the resilience it needs, the FPC is: