The worst is yet to come for UK banks, Bank of England (BoE) deputy governor Samuel Woods said today.
The UK’s banking sector has been shielded from the worst effects of the Covid-19 pandemic by government relief measures and the toughest time still lay ahead, Woods said.
Government relief schemes such as furlough payments and guarantees on loans from banks to companies, are being wound down in coming months.
“We feel good about what’s happened so far but in a way the tougher bit is coming,” Woods told a London School of Economics webinar.
“The government has pushed out a lot of stress in time, but some will still come through.”
The government last week estimated close £31bn of its Covid-19 support schemes will have to be written off, with taxpayers not lender footing the bill.
The big British banks collectively hold £260bn of equity capital – a “fairly decent number” – but it will be under more pressure this year as some corporate loans turn sour, Woods said.
“I am not worried about that, it will be manageable but it will be significant.”