The cover of today's Interim Financial Stability Report shows the City's skyscrapers against the backdrop of a clear blue sky, notably free of the vapour trails from the aircraft we normally see in large numbers, underlining the deep and broad impact of Covid-19  on our country's economy.

The Financial Policy Committee (FPC) has carried out a desk-top stress test of the UK banking system to understand how banks? regulatory capital and liquidity may evolve. As a starting point the FPC has used the revised MPC scenario, which is based on an increase in UK unemployment to over 9 per cent and a 30 per cent reduction in GDP this year.

This scenario, which is not a forecast, suggests that economic activity will start to recover in the summer and grow rapidly next year, although the rate of growth is dependent on the government's plans, and individuals? appetite, to ease social distancing.

The stress which banks are living through now, along with the rest of society, suggests that they will remain more resilient to this real-life period of difficulty than they were forecast to be at the end of the 2019 stress test. Banks can weather the £80 billion of credit losses that the scenario suggests will crystallise over the next two years by drawing down on the capital buffers they hold over and above their regulatory minima, which they should do.

Because of the temporary payment holiday banks have granted to their mortgage customers, only 5 per cent of these losses are in residential housing, with most UK losses forecast to be in consumer credit and corporate lending, and with banks experiencing almost half of their losses in non-UK markets. The substantial macroeconomic stimulus and support measures announced by the authorities will prevent significant longer-term damage to the global economy ensuring these losses are not higher.

Banks have already provided significant amounts (including 1.6 million mortgage holidays, over £2 billion of Bounce Back Loans and £5.5 billion of lending to SMEs through CBILS) of new lending to businesses and households impacted by Covid-19 and have the capacity to continue to do so for the foreseeable future, supported by government guarantees that will absorb some of the credit losses that might materialise. Importantly, it is in the industry's interest to support society. By doing so, not only are they doing the right thing but also ensuring too that the overall economic outcome is not worse than it might otherwise be. Higher business failure rates would lead to even higher unemployment rates which would, in turn, lead to greater losses for banks and further decreases in their capital.

So if you or your business have been affected by Covid-19 please speak to your financial provider - they will be there to support you through these tough times.