Financial Stability

Created
Wed, 17/07/2024 - 18:00
Joel Mundy and Matt Roberts-Sklar When markets are volatile, liquidity tends to worsen. This makes it harder to intermediate buyers and sellers. We saw this during the 2022 liability-driven investment (LDI) stress, when the UK government bond (gilt) market exhibited extreme volatility. This illiquidity was also evident in gilt futures, derivatives that support functioning in … Continue reading Futures under stress: how did gilt futures behave in the LDI crisis?
Created
Wed, 10/07/2024 - 18:00
Miruna-Daniela Ivan, Joshua Lillis, Eduardo Maqui and Carlos Cañon Salazar Funding markets are crucial for healthy and active financial institutions, and consequently for everyone in the economy. The repurchase agreement (repo) market plays a key role in bank and non-bank financial institutions’ (NBFIs’) daily activities by facilitating short-term financing and risk hedging. In this post, we … Continue reading ‘No one length fits all’ – haircuts in the repo market
Created
Wed, 22/05/2024 - 18:00
Nuri Khayal and Jonathan Loke Many households in the UK have seen their mortgage payments go up since mortgage rates started to increase in 2022. In the current environment of higher rates, the question of how much a household can comfortably spend on their mortgage payments before getting into financial distress is particularly relevant. This … Continue reading The link between mortgage debt servicing burdens and arrears: is there a critical threshold?
Created
Thu, 16/05/2024 - 18:00
Adam Brinley Codd, Daniel Krause, Pierre Ortlieb and Alex Briers We both drive cars, but the US drives on the right while the UK drives on the left. We both walk, but we do so on sidewalks in the US and pavements in the UK. We both have asset managers, who want to take leveraged … Continue reading Leverage finds a way: a comparison of US Treasury basis trading and the LDI event
Created
Wed, 24/04/2024 - 18:00
Julian Reynolds Policymakers and market participants consistently cite geopolitical developments as a key risk to the global economy and financial system. But how can one quantify the potential macroeconomic effects of these developments? Applying local projections to a popular metric of geopolitical risk, I show that geopolitical risk weighs on GDP in the central case … Continue reading Quantifying the macroeconomic impact of geopolitical risk
Created
Thu, 18/04/2024 - 18:00
Jelle Barkema, Maren Froemel and Sophie Piton Record-high firm exits make headlines, but who are the firms going out of business? This post documents three facts about the rising number of corporations dissolving using granular data from Companies House and the Insolvency Service. We show that the increase in dissolutions that have already materialised reflected … Continue reading Three facts about the rising number of UK business exits
Created
Wed, 03/04/2024 - 19:00
Laura Achiro, Gerry Gunner and Neha Bora A flow of funds framework is a way of understanding and tracking the movement of financial assets between different sectors of the economy. This blog specifically analyses UK corporate and household sectoral flows from 2000 to the present and highlights how this framework can reveal useful trends and … Continue reading Flow of funds and the UK real economy
Created
Wed, 06/03/2024 - 20:00
Laura Achiro and Neha Bora Central banks in most advanced economies have tightened monetary policy by raising interest rates. Tighter financing conditions may make it harder for some businesses to refinance their debt or could mean they face less favourable terms when they do. This blog explores the extent to which bond maturities could crystallise … Continue reading How resilient are UK corporate bond issuers to refinancing risks?
Created
Wed, 21/02/2024 - 20:00
Alice Crundwell and William Bennett Accurate measures of the number of firms at risk of failure are becoming increasingly important for policymakers, as corporate insolvencies are continuing to rise and interest rates are expected to remain higher than over much of the past decade. The share of vulnerable firms is often assessed by looking at … Continue reading Stressed or in distress? How best to measure corporate vulnerability
Created
Wed, 07/02/2024 - 20:00
Daniel Norris, Elio Cucullo and Vasilis Jacovides When borrowers enter a fixed-rate mortgage, lenders test whether they could continue to afford their mortgage if interest rates were to increase by the time it comes to re-fix. This ‘stressing’ is designed to create additional resilience for borrowers and the financial system. Over the last two years, … Continue reading Mortgage affordability for borrowers who re-fixed in 2023