United Kingdom: Private sector loans drive growth in bank balance sheets

BNP Paribas Team BNP Paribas

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

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BNP Paribas Team

BNP Paribas

BNP Paribas Economic Research Department is a worldwide function, part of Corporate and Investment Banking, at the service of both the Bank and its customers.

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