Bank of England asks banks to estimate pandemic loan losses
LONDON (Reuters) – The Bank of England will gather more information from banks on their likely loan losses due to the pandemic, its deputy governor Sam Woods said on Thursday.
The BoE’s Prudential Regulator will collate the data ahead of banks’ second-quarter results to compare the timing and amount of losses with those it modeled last month.
“This information will allow us to identify any significant outliers and further refine our estimates for future capital exercises,” Woods said in a letter to the banks.
Britain is facing its worst recession in 300 years due to a nationwide lockdown that has closed businesses and put millions of workers on leave, with losses on business loans set to explode.
The Bank estimated last month that bank loan losses could reach £ 80 billion by the end of 2021, but lenders are strong enough to keep the flow of credit to businesses and households going.
The BoE has already issued guidance on how banks can take into account government relief measures such as loans and repayment holidays on mortgages when calculating expected losses and how much capital to set aside. to cover them.
On Thursday, Woods gave further guidance on how banks should value capital and accounting treatment for the three-month mortgage payment holiday that ends this month in some cases ahead of second-quarter tax returns. .
Reporting by Huw Jones; Editing by Andrew Heavens