US ratings agency out with a note on UK banks post-Brexit 28 July

  • in downside scenario asset quality of UK banks deteriorates significantly,
  • ratio of NPLs rises ti 4.9% in 2018 from 2% in 2015
  • UK banks would need £68bln to restore capital ratios to levels seen at end of 2015
  • UK banking sector would see significant capital losses in event of worse than expected macroeconomic downturn .

In his recent testimony to the UK parliamentary committee Carney urged banks to lend the money they've been gorging on in cheap conditions. If Moody's are right then there's going to be no rush to lend even if rates were cut next week.

To quote our friend and eminent economist John Hearn from a tweet this morning

"Lower interest rates necessary to boost the economy": any evidence that low rates can do this? No but they do blow bubbles"

Full Moody's report here

Meanwhile GBPUSD still on the back foot with EURGBP underpinned and USD buyers returning.