Bank of England (BoE) Governor, Andrew Bailey, has said that the central bank remains in no rush to respond to increased oil prices and that inflation was on course to return to its 2.0% target, albeit later than he would have liked. Mr Bailey said past increases in oil prices meant that UK inflation looked likely to rise to around 3.2% later this year from 2.8% in May, but the cost of oil now was not much higher than before the Iran war broke out at the end of February. Mr Bailey made similar remarks earlier this month when he was part of the 7-2 majority on the BoE’s Monetary Policy Committee (MPC) that voted to keep interest rates on hold at 3.75%.
The Financial Conduct Authority (FCA) has announced that parts of its proposed £9.1 billion motor finance compensation scheme would be suspended while legal challenges are heard, with proceedings expected in December 2026 or February 2027. The FCA’s plan to compensate consumers over a 17-year motor finance mis-selling scandal was thrown into doubt after challenges from Credit Agricole, consumer group Consumer Voice and the financial services arms of carmakers Volkswagen and Mercedes-Benz.
The Bank of England has eased proposed stablecoin rules following widespread concern they risked stifling development of a nascent sterling-backed market, though some in the industry said the changes fell short of enabling an internationally competitive sector. The BoE, which is finalising rules for sterling stablecoins, that can be widely used for retail payments, has scrapped plans to cap the amount of stablecoins individuals can hold, opting instead to limit total issuance per stablecoin, initially set at £40 billion.
The Bank of England (BoE) has signalled the need for bespoke AI regulation to contain risks to the financial system posed by increasingly capable agentic systems in a potential shift in its approach to overseeing the technology. Following years of insistence that existing frameworks were sufficient to mitigate AI risks, Deputy Governor, Sarah Breeden, said recent developments had exposed potential gaps that could require a more sophisticated regulatory response. Ms. Breedon believes that the existing frameworks are not built to contemplate autonomous agents and relying on a human in the loop for all agent actions is unlikely to be realistic. Ms. Breeden said the BoE is considering whether banks need enhanced recovery for core systems, allowing one bank to take over another’s basic functions during a disruption. Other measures under consideration include fresh guardrails and circuit breakers (i.e. kill switches) that would limit or stop trading market-wide if faulty AI models cause a market meltdown.
The Bank of England (BoE) has set out the scenario for this year’s stress test of private markets, modelling a severe global shock that sends equity markets down 35% and pushes inflation up to 7%. The test assumes unspecified geopolitical events disrupt supply chains that triggers a deep downturn in which the UK economy shrinks by 4% and unemployment rises. The exercise is designed to assess how banks and non-bank financial institutions active in private markets would respond to a severe but plausible global recession, and how their behaviour could interact to amplify stress across the financial system.
UK banks recorded the sharpest increase in losses to certain types of fraud since the COVID-era boom in technology-enabled scams, renewing calls for government action against platforms such as Meta where many cases originate. Data from industry body, UK Finance, showed losses from authorised push payment, or APP, fraud – including investment and purchase scams in which criminals trick victims into transferring money – rose 19% to £576.4 million last year.
During the month, Fitch raised the outlook for Goldman Sachs & Co. and other rated Group-entities to “Positive” to reflect agency expectations that less volatile fee and financing revenue will continue to grow and account for a majority of total revenue over the rating horizon. In addition, Fitch raised the outlook for Toronto Dominion Bank to “Stable” to reflect the limited effect on the bank’s franchise, earnings and risk profiles from the 2024 U.S. regulatory investigations into deficiencies in its anti-money laundering (AML) practices. Meanwhile, S&P raised the outlook for Société Générale SA to “Positive” to reflect agency expectations that the bank can strengthen its capital base as a result of recent improvements in financial performance supported by its ongoing transformation into a more profitable and efficient bank.