The Bank of England has ordered British banks to build up billions in cash reserves.
It says capital buffers will need to be raised by nearly 13 billion euros over the next 18 months to guard against potential risks surrounding Brexit, growing consumer credit and a potential slow down in China.
Bank of England Governor Mark Carney said:“There are pockets of risk that warrant extra vigilance. Consumer credit has been increasing rapidly, lending conditions in the mortgage market are becoming easier, and lenders may be placing undue weight on the recent performance of loans in benign conditions. There are also potential risks to financial stability associated with the range of possible outcomes and the number of paths to them under the Brexit process.”
The move to re-introduce so called “countercyclical capital buffers” reverses the Bank of England’s earlier decision to reduce them to zero following the vote to leave the European Union last July.