Friday, the Bank of England said many banks in the UK and internationally need to strengthen their balance sheets further by reducing leverage and planning to extend the maturity of their funding.
In its twice-yearly Financial Stability Report, the central bank said, "While their profitability is relatively buoyant and market conditions broadly favorable, banks should take opportunities to strengthen their balance sheets." Further, banks should insure against future adverse developments, said BoE.
Given their balance sheet vulnerabilities, banks remain exposed to any future deterioration in macroeconomic and market conditions, which could substantially raise the cost of funding and capital raising in the future, the BoE added.
Further, the central bank noted that probability of default by UK real estate companies has increased significantly. As annual gross income growth fell sharply, rental values are expected to decline further in the next year.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.