(Bloomberg) --
The Bank of England is examining whether dangerous cladding on apartment blocks could undermine the stability of British lenders, according to a person familiar with the matter.
The central bank's Prudential Regulation Authority is in discussions with trade bodies and banks to work out lenders' exposures to leasehold flats with fire safety concerns, the person said, asking not to be identified because the probe isn't public. Although their initial findings indicated the banks can absorb the risks, the watchdog is seeking further reassurances, the person said.
In the aftermath of the Grenfell Tower tragedy in 2017, where a high rise block of flats with flammable cladding caught fire and killed 72 people, the safety of thousands of apartment blocks across the U.K. has been brought into question. It is unclear whether builders, residents or the government will ultimately pay the billions of pounds needed to make properties safe.
Many leaseholders are seeing increasing costs of safety measures falling to them. If they default on their mortgages as a result, the financial burden could be pushed onto the banks that lent to them.
The full bill for fixing dangerous buildings could come to 15 billion pounds ($20.6 billion), according to a parliamentary report last year, though it's uncertain exactly how many properties are affected or the type of repairs needed. The government has pledged 5 billion pounds to make buildings safe.
The Telegraph reported the probe earlier.
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