Shows UK banking is resilient to deep simultaneous recessions
The seven biggest lenders of the UK are all strong enough to cope with a “disorderly” no-deal Brexit, according to a Bank of England (BoE) report today.
All major banks of the UK would be able to cope with a ‘disorderly Brexit’ without having to be bailed out by taxpayers, stated the report published on the back of its rigorous annual stress test.
Stress tests were carried out on Lloyds Banking Group, HSBC, Barclays, Royal Bank of Scotland, Santander UK, Standard Chartered and Nationwide. The test works out how much the level of capital held by each lender would fall.
“The 2017 stress test shows the UK banking system is resilient to deep simultaneous recessions in the UK and global economies, large falls in asset prices and a separate stress of misconduct costs,” the Bank of England said.
Last year, both Barclays and Royal Bank of Scotland had failed the test when examined on the basis of how much capital they held at the start of the year.The Bank clarified today that since then, both had improved their situation sufficiently.
The Bank’s Financial Policy Committee also set out a wishlist of actions it says need to be taken to try to mitigate the risks to UK financial services posed by the departure from the EU.
Tests were put in place in the aftermath of the 2008 financial crisis to try to ensure that, should another sharp downturn occur, lending would not seize up, accentuating the difficulties faced by the wider economy.