The Bank of England published its bi-annual Financial Stability Report, which covers the Financial Policy Committee's assessment of the outlook for the stability and resilience of the financial sector at the time of preparation of the Report, and the policy actions it advises to reduce and mitigate risks to stability. The Committee recommended that the Financial Services Authority (FSA) takes action to ensure that the capital of UK banks and building societies reflects a proper valuation of their assets, a realistic assessment of future conduct costs and prudent calculation of risk weights. Where such action reveals that capital buffers need to be strengthened to absorb losses and sustain credit availability in the event of stress, the FSA should ensure that firms either raise capital or take steps to restructure their business and balance sheets in ways that do not hinder lending to the real economy.
