But they are now moving into a phase where credit losses in the banking book will begin to rise. And banks are entering this phase with weakened balance sheets. Alongside a rise in credit related losses, the outlook for bank profitability is poor.
The aggregate amount of capital in the system is great enough, under reasonable scenarios, to prevent the system as a whole from falling below regulatory thresholds. But the distribution of that capital obviously matters. And, for larger banks, the capital levels demanded by the market have gone up in response to the greater uncertainty and reduced transparency about their balance sheets.