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BoE Warns That Tariffs May Harm UK Banks

BoE Warns That Tariffs May Harm UK Banks

by Starling Insights

Starling Insights Editorial Board

May 06, 2025

Observations

In recent comments to the UK House of Commons Treasury Select Committee, Sam Woods, Deputy Governor of the Bank of England (BoE), said that the central bank is closely monitoring the impact of US President Donald Trump's newly announced tariffs, warning they could lead to a rise in bad loans among UK lenders.

According to the Financial Times, Woods said that the BoE had increased its oversight during the market volatility triggered by Trump's "liberation day" tariffs. Meanwhile, banks have been increasing provisions for losses and taking other steps to prepare for a downturn. "We are watching [the effect of tariffs] very closely," Woods assured, adding that the central bank is focusing on whether banks will "provide more for a different economic environment."

HSBC has already taken a $150mn charge tied to "increased economic uncertainty," contributing to a total of $876mn in loan loss provisions for the first quarter. Woods noted a "quite concerning" sell-off in both the US dollar and US Treasuries, which is unusual during periods of market stress. "Normally, we see a flight into these assets," he said.

US Treasury Secretary Scott Bessent added to concerns in April when he said, "We should not outsource decision making for the United States to international bodies," and that the country may "borrow selectively" from Basel rules. However, Woods said he was later "very roundly reassured" by US officials that these comments did not signal a major policy shift.

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