The credit risk concern is, of course, that households stretching to qualify for loans will be severely challenged if, for example, interest rates rise, causing the adjustable rate on a hybrid loan to reset at a much higher rate.
However, we are witnessing a new wave of risk aversion affecting share prices of banks not exclusively linked to banks with relevant exposure or operations in UK. This risk aversion might partly be linked to concerns about the future profitability of some banks. Where should the City relocate to? Frankfurt? Paris...? It’s too soon to be talking about this.