- BoE's Financial Policy Committee: There is evidence of heightened risk-taking in some financial markets
Market news
8 October 2021
BoE's Financial Policy Committee: There is evidence of heightened risk-taking in some financial markets
- UK banking system is strong enough to continue to support households and businesses through economic recovery
- UK financial system is resilient to risks from the higher level of debt among UK businesses; the way these risks evolve will depend on how the economy recovers from the pandemic
- The increase in debt in UK corporate sector has been concentrated in some sectors and types of businesses, in particular in small and medium-sized enterprises (SMEs)
- There is evidence that investors are taking higher levels of risk in some global markets, e.g. there are fewer protections in place when investors lend to companies with high levels of debt in so-called "leveraged loan" markets, and the prices of some financial assets appear high relative to historical norms
- We are monitoring these risks closely. We are also working with UK and other international authorities to make market-based finance more resilient to shocks, so that financial markets can support economy in bad times as well as good
- Asset valuations could correct sharply if, for example, market participants re‐evaluate prospects for growth, inflation or interest rates; any such correction could be amplified by vulnerabilities in market‐based finance that were exposed in March 2020. This could have consequences for market functioning and financial conditions, and hence real economy
- Cryptoasset markets continue to grow rapidly, but currently pose limited risk to UK financial stability
- However, regulatory and law enforcement frameworks, both domestically and at global level, need to keep pace with developments in these fast-growing markets in order to manage risks
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