"For insurers, the low rate environment and persistent soft conditions in many segments of general insurance are creating real pressures."
Sam Woods, Deputy Governor of Prudential Regulation and head of the PRA, admitted that "this is now a first-order issue for us as the PRA and FPC".
He added that the banking system still looks fragile, which "may be largely due to weakened business franchises".
Woods also discussed the £15 billion of provisions relating to past misconduct which was disclosed by banks in 2015 and in total reduced their pre-tax profits by around a half.
He said that past misconduct by banks "casts a very long shadow – most importantly, on the lives and livelihoods affected by unacceptable behaviour, but as a secondary effect on banks’ ability to generate sustainable returns and build capital internally".
Woods continued: "For insurers, the low rate environment and persistent soft conditions in many segments of general insurance are creating real pressures. And judging from their persistent low profitability and price-to-book ratios, developing sustainable business models remains a major challenge for many banks."
Woods says that the Bank of England now needs "to complete the implementation and give firms a proper chance to adapt to the new world".
