Although finely balanced, the Monetary Policy Committee (MPC) voted by a majority of 5-4 to hold Bank Rate at 4.00% at its November meeting despite recent better-than-expected economic data which indicated that inflation was lower than expected at 3.8% while unemployment is currently running at a four-year high. Some analysts had been lobbying for a pre-emptive cut in interest rates to help offset any hit to growth from potential tax rises in the November budget but the MPC on balance has adopted a wait-and-see approach with a December cut still possible. The outcome is consistent with the consensus view of economists in the latest Reuters monthly poll who also predicted that the MPC would keep interest rates at 4.00% for the rest of this year. Financial markets expect the Bank of England (BoE) to wait until as late as the middle of next year to cut borrowing costs.
The Monetary Policy Committee (MPC) has made to explain in more detail its decisions on interest rates and other monetary policy issues. The Bank of England (BoE) is taking these steps in response to a review of how its forecasting should adapt to greater uncertainty in the world economy and its communication. In another change, the minutes of MPC meetings will give space for each of its nine members to explain their own policy views.
The Bank of England (BoE) will only remove proposed caps on the quantity of stablecoins individuals and businesses can hold when it is confident they do not pose a threat to financial stability. The central bank has taken a tougher stance than many other authorities on embracing stablecoins, a type of crypto-asset pegged to fiat currency that has soared in popularity. Fiat currency is government-issued money that isn’t backed by a physical commodity like gold or silver. The crypto industry has opposed the planned cap but the central bank believes that they are needed because of the potential impact of significant and rapid outflows of bank deposits into stablecoins.
The Prudential Regulation Authority (PRA) has rejected calls from the banking industry to further relax rules on bank leverage despite growing pressure from the UK Government to reduce regulatory burdens to boost the UK’s economic growth and compete more effectively with the U.S bank capital rules. However, as a compromise, the PRA has proposed raising the threshold at which the leverage ratio will apply.
Swiss market regulator, FINMA, intends to appeal a ruling by a Swiss court that revoked a decree by the regulator ordering the write-off of Credit Suisse debt during the bank’s collapse in 2023 and acquisition by UBS Group. The Federal Administrative Court adjudged that the write-off of 16.5 billion Swiss francs in Credit Suisse Additional Tier 1 (AT1) bonds was unlawful which has boosted bondholders’ hopes of recouping losses and raises fresh questions about how authorities handled the bank’s demise.
During the month, Moody’s downgraded the long-term credit ratings of Close Brothers Ltd and its parent while reaffirming their “Negative” outlooks to reflect the continued uncertainty related to the ongoing regulatory review of motor finance commission compensation and the Group’s ultimate cost of redress. Moody’s also upgraded the long-term credit ratings of Banco Santander SA as part of a general rating action on 15 Spanish banks to reflect the improved economic and credit conditions in Spain which has also resulted in a similar raising of the sovereign outlook. Moody’s lowered the outlook for Société Générale SA to “Negative” to reflect a similar reduction in the Sovereign outlook driven by the weakening capacity of the Government of France to support the country’s systemic and strategic financial institutions (in case of need) given the risk of a durable weakening of the country’s institutions. In addition, Moody’s upgraded the long-term deposit rating of JP Morgan Chase Bank NA, its Parent and other rated Group subsidiaries to reflect the Group’s superior financial performance driven by steady growth in client balances and an increased market share as well as peer-leading pre-provision profitability on risk-weighted assets. Meanwhile S&P has raised the long-term credit ratings of Clydesdale Bank plc to reflect the steady progress in integrating the Bank and parent into the wider Group since the completion of the acquisition last year as well as agency expectations that the Group will continue to deliver a resilient performance and maintain a robust balance sheet while continuing to mitigate the execution risks from the acquisition.