Financial Stability Report July 2025 (Bank of England)

Summary

• The FPC maintained the UK countercyclical capital buffer rate at its neutral setting of 2%.p.11
• The share of mortgage lending at a loan to income ratio of 4.5 or above rose to 9.7% in 2025 Q1, against a flow limit of 15%.p.10
• The US announced a 90-day pause in tariffs after market stress, during which core government bond and repo conditions had been deteriorating.p.8
• The role and size of private equity and private credit has grown significantly over the past 15 years.p.13
• Market uncertainty measures rose markedly after the US announced plans for significantly higher tariffs on 2 April.p.8

Key insights

1. The US dollar depreciated and US Treasury yields rose during the April stress, unlike in previous periods of market stress.p.8
2. Functioning of core government bond and repo markets remained orderly, with no net selling of gilts.p.8
3. The Bank plans a discussion paper on gilt repo market options, including greater central clearing and minimum haircuts.p.12
4. The private market ecosystem remains largely untested in an environment of sustained higher interest rates and weaker growth.p.13
5. The FPC welcomes the findings published in the CST24 thematic letter of 9 July.p.14
6. The FPC supports exploring options for allowing some return on backing assets for stablecoins widely used as money.p.14