The Bank of England‘s financial stability assessment report released today said that the British economy can withstand the risks brought about by rising interest rates, but it will take some time for interest ratehikes to fully exert their impact.
“The proportion of households with a high debt service ratio has increased and is expected to continue to rise through 2023, but is expected to remain somewhat below the historic peak reached in 2007,” the BoE said, adding that households are under pressure relative to banks. The impact of interest rates was greater, while the corporate sector remained “generally resilient”.
“However, higher funding costs could put pressure on some smaller or highly leveraged firms,” the BoE added.
Following the collapse of Silicon Valley Bank, the central bank is working with the UK Treasury to ensure that there is a way to smoothly wind up smaller lenders, which do not need to comply with some of the rules that apply to larger banks.