The full impact will be seen in stress test results to be reported at the end of November. There was press speculation that an additional £10bn of capital will be need as a buffer.
Abridged extract:
Within a benign overall domestic credit environment, there is a pocket of risk in the rapid growth of consumer credit. This is not a material risk to economic growth, as consumer credit represents 11% of household debt. It is a risk to banks’ ability to withstand severe economic downturns, because this asset class is disproportionately more likely to default. ..
The FPC has responded to this by accelerating its analysis of credit losses that banks could incur in the very deep recession in the 2017 annual stress test scenario.
The FPC and PRC judge that, in the first 3 years of that severe stress test scenario, the UK banking system would incur UK consumer credit losses of c. £30 bn, or 20% of consumer credit loans, representing 150 basis points of the aggregate common equity Tier 1 capital ratio of UK banks.
Regulatory capital buffers will be set following the stress test so that each bank can absorb its losses on consumer
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