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BoE bringing the macroprudential mop - Nomura

FXStreet (Delhi) – Research Team at Nomura, notes that the countercyclical capital buffer is likely to rise soon for the UK markets as an extraordinarily long period of extremely loose monetary policy is causing the credit cycle to advance.

Key Quotes

“Policymakers probably seek to respond to these risks, but markets may view it as a substitute for conventional monetary tightening.”

“Informed by the stress test results on 1 December, we expect the FPC to set the countercyclical capital buffer (CCyB) at 0.5%. This should be absorbed by management buffers, but future changes will make it more challenging.”

“There may be some additional pressure to raise capital through deleveraging and retained earnings. This puts upward pressure on the cost of capital and thus downward pressure on both the return on capital and GBP.”

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