The Bank of England’s July 2025 Financial Stability Report says the UK banking system is strong enough to support households and businesses through a serious deterioration in economic and financial conditions. This is reassuring. The system can absorb market volatility, geopolitical shocks and an economic gale, although it may still become emotionally unavailable when someone asks to change a standing order without remembering the name of their first hamster.
The report examines risks across financial markets, lending and the wider economy. It notes that markets have been highly volatile, global uncertainty remains elevated and weaknesses in non bank finance could amplify a shock. The banking system is well capitalised, liquid and, according to the Bank’s assessment, capable of continuing to support the country when conditions turn ugly.
Meanwhile, the imaginary Institute of Prudent Nerves has tested every major lender against a fresh scenario. Share prices fall, interest rates jump and one customer replies “No” to the chatbot three times. The model records this as an extreme event requiring six committees and a replacement biscuit.
Alistair Pencilmoney, the Institute’s imaginary Deputy Warden of Calm, reports that banks have prepared for everything except a caller who says “representative” in a normal voice. The phrase has apparently been added to the list of risks alongside cyber attacks, market contagion and people who know exactly what they want.
The Bank’s assessment asks whether lenders can continue serving people and firms during stress. That is the useful bit. A panel of executives, however, briefly misunderstood “service continuity”. They spent forty minutes debating whether hold music should continue during a meteor strike, before deciding that the meteor would need to pass security checks.
First, the banking sector survived a hypothetical recession. Next, it survived a fall in asset prices. Then it survived a sharp rise in rates. Finally, it faced the branch printer. The display announced “Paper Jam”. Nobody could confirm whether this was a test or a prophecy.
Financial stability needs capital, supervision and careful judgement. It also needs the public to believe that the system works. Nobody judges resilience by a graph showing liquidity coverage. They judge it by whether the app lets them pay the plumber at 4.57pm, rather than inviting them to begin a meaningful conversation with a digital assistant called Helpfully.
The banking system can evidently withstand a global shock. It just cannot withstand a customer who has forgotten a password, lost a phone and refuses to describe their first hamster’s personality. The hamster, meanwhile, remains the only party in the process with no overdraft.
Source: Bank of England.
