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\t\tThe Bank of England’s has warned on rising global threats. \t<\/p>\n\t\t\tTuesday 02 December 2025 9:07 am
\n\t\t\t\t\t\u00a0|\u00a0\u00a0Updated:\u00a0<\/p>\n
\t\t\tTuesday 02 December 2025 12:34 pm\n\t<\/p>\n
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\t\tThe Bank of England’s has warned on rising global threats. \t<\/p>\n
The Bank of England has warned of increased global risks to financial stability, even as it slashed rules imposed on UK lenders dictating the amount of capital they must hold.<\/a><\/p>\n The central<\/a> bank said \u201crisks to financial stability have increased during 2025\u201d.<\/p>\n \u201cGlobal risks remain elevated and material uncertainty in the global macroeconomic outlook persists,\u201d the Bank added.<\/p>\n The Financial Policy Committee (FPC) identified geopolitical tensions, the fragmentation of trade and financial markets as well as pressures on sovereign debt markets as key sources of risk.<\/p>\n \u201cAs an open economy with a large financial centre, the UK is exposed to global shocks, that could transmit through multiple, interconnected channels,\u201d it added.<\/p>\n The Bank also doubled down on previous warnings surrounding an AI bubble stating many equities \u201cremain materially stretched\u201d and drew comparisons to the dot-com bubble and the global financial crisis.<\/p>\n \u201cThis heightens the risk of a sharp correction,\u201d the report said.<\/p>\n It also gave a stark warning on the role debt financing was playing in the AI sector.<\/p>\n \u201cDeeper links between AI firms and credit markets, and increasing interconnections between those firms, mean that, should an asset price correction occur, losses on lending could increase financial stability risks.\u201d<\/p>\n On private credig, the Bank cited \u201cpotential weaknesses\u201d with reference to the collapse of First Brands and Tricolor<\/a>, which it said \u201cintensified focus\u201d on these weaknesses.<\/p>\n The Bank reiterated warnings that due to the UK\u2019s open economy \u201cstress in one market\u2026 could spillover into other markets\u201d.<\/p>\n The FTSE 100 suffered one of its worst trading sessions all year<\/a> in October amid the private credit jitters with steep losses across UK banks.<\/p>\n Karim Haji, head of financial services at KPMG, said:\u00a0\u201cUK Financial Services firms have proved resilient time and again both by regulatory stress tests and real life shocks. But global risks persist.<\/p>\n \u201cThe past year has shown that risks aren\u2019t confined to traditional economic shocks and when an event happens the impacts are felt immediately due to the interconnectedness of the financial system and technology.\u201d<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tBanks gear up for boost with loosening of capital rules<\/a><\/p>\n \tBank takes chop to lenders\u2019 capital rules<\/p>\n Elsewhere, the central bank took the chop to rules around capital requirements following lobbying efforts from the banking industry body\u00a0UK Finance<\/a>, which claimed up to \u00a354bn of extra capital has been racked up by the sector due to holding rules.<\/p>\n Following the FPC\u2019s latest report, UK lenders\u2019 capital requirements will be eased to 13 per cent from 14 per cent previously.<\/p>\n This means 13 per cent of a bank\u2019s risk-weighted assets must be funds that can absorb unexpected losses without putting customers or the financial system at risk.<\/p>\n The fresh changes come after the UK\u2019s top seven banks, Lloyds, Barclays, Natwest, Santander UK, Nationwide and Standard Chartered, breezed through stress tests with the conclusion the lenders were strong enough to continue lending through \u201ca severe but plausible\u201d economic shock.<\/p>\n Bank of England Governor Andrew Bailey said the decision was a \u201csensible reflection of conditions\u201d and a \u201csensible reflection of the health of the banking system\u201d.<\/p>\n When asked whether regulation was \u2018overdone\u2019 in the fallout of the 2008 crisis, Bailey said the banking sector had come through \u201cvery substantial\u201d economic shocks \u201crobustly\u201d.<\/p>\n He later added: \u201cWe learn from experience.. that\u2019s why we feel comfortable making these changes.\u201d<\/p>\n The move is expected to mark a major shift in the deregulation mission, as sought out by the Treasury, with analysts expecting the changes to have a more tangible impact than Rachel Reeves\u2019 Leeds Reforms package announced earlier this year and free up billions for lenders to pump into the economy.<\/p>\n Haji said: \u201cRegulations need to be robust but proportionate and UK banks have huge pools of capital. The recommendation to update the CET1 benchmark\u00a0is a helpful step towards maintaining the UK\u2019s resilience whilst also being supportive of growth.\u201d\u00a0\u00a0<\/p>\n The cash cushion \u2013 known as Common Equity Tier 1 (CET1) \u2013 is designed to protect a lender against shocks or economic turmoil and consists of bank funds that do not need to be repaid.<\/p>\n Top banking bosses had called for such changes to be introduce in meetings with lawmakers earlier this year.<\/p>\n \u201cI think more in terms of looking at how we measure capital\u2026 I think that will put a competitive strain on UK banks in particular when you look at what\u2019s happening in the United States,\u201d Michael Roberts, chief executive of HSBC Bank,\u00a0said in a House of Lords session.<\/a><\/p>\n \t\t\t\t\tRead more<\/p>\n