United Kingdom: Private sector loans drive growth in bank balance sheets
|The Bank of England's (BoE) aggregate balance sheet statistics for the Monetary and Financial Institutions (MFIs) provide a macroeconomic picture of the UK banking system.
They illustrate the contraction of bank balance sheets until December 2015 (-19% compared to January 2010). This was mainly the result of the decline in outstanding loans to the resident non-financial private sector, whose debt was returning to more sustainable levels. Non-resident claims and interbank transactions also contributed to the decline in bank balance sheets.
The trend has reversed since 2016 (+ 19% between December 2015 and March 2019), but the balance sheet of the UK banking sector has not yet returned to its 2010 size in terms of value or as a percentage of GDP (GBP 4,122 bn or 195% of GDP in March 2019 vs. GBP 4,288 bn or 279% of GDP in January 2010). The recovery is driven by the recovery of outstanding vis-à-vis the resident non-financial private sector (+ 17% after -20% between 2010 and 2015), and for nonresidents (+ 21% after - 15%). The interbank market remained at a low level, partly driven by the BoE's operations* (+ 68% after + 49%).
*such as quantitative easing or term funding scheme implemented by the BoE to inject liquidities
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.