The Financial Times is blaming President Trump for rising bad loans held by banks. That was the gist of the comments made by Sam Woods, chief executive of the Bank of England’s Prudential Regulation Authority, the BOE’s top financial supervisor, in testimony before the House of Commons Treasury select committee on Tuesday, April 29. The BOE is concerned over rising bad loans held by banks, he explained, because the Trump tariffs will produce “an expected economic slowdown likely to lead to higher provisions for loan defaults,” FT reported.
“We are watching it [the effect of tariffs] very closely,” Woods said. “The thing we are watching for next is also what will be the macro impact of all this.” Woods is also a BOE deputy governor.
FT’s article reported that HSBC bank on April 29 “took a $150 million hit to reflect increased economic uncertainty, as part of the overall $876 million charge for bad loans that the bank recorded in the first quarter of this year, slightly higher than analysts’ forecasts.… Shares in some British banks dropped as much as 20% in response to Trump’s tariff announcements, and Woods said it was ‘unusual for us to have that much value wiped off the value of our banks.’”
“What we really watch for is the risk of contagion into funding,” he said. “That is what we really care about and we didn’t really see any sign of that,” he said hopefully.
Trump’s tariff announcements had “created quite a dent in the way the U.S. is seen by both regulators and investors,” said Woods, who was in Washington last week for the IMF and World Bank Spring meetings. He highlighted a “quite concerning” sell-off in both the U.S. dollar and in U.S. government bonds that followed Trump’s tariff announcement, along with a drop in share prices.
“We are asking ourselves the question: what would happen if there was a more fundamental drop in appetite for either dollar-denominated assets, or U.S. assets, or Treasuries, or some version of that?”
