The fragility of the U.K. banking sector has become a staple of economic and political discourse, with commentators regularly predicting its imminent demise, dragging us all down into a pit of unemployment, business insolvency, house price collapse and productivity levels even lower than their – already dire – current levels.
The risks are certainly overblown: U.K. banks and building societies maintained strong capital and liquidity positions during COVID, and have been posting healthy profits in the post-pandemic era. The major banks passed the Bank of England’s resilience test (using a severe stress scenario) with largely flying colours and the collapse of Credit Suisse and of a trio of mid-size U.S. banks in 2023 barely caused a ripple in the U.K. banking pond.
