The UK’s eight biggest banks have all passed a Bank of England test that show they could fail without hurting taxpayers or customers, although shareholders would be first in line to bear the costs.
With a gloomy near-term economic outlook, the resolvability test will provide some relief that the UK’s key financial players wouldn’t cause a disaster if something went very badly wrong.
It’s important to recognise this test wasn’t carried about because of ‘live’ fears. It is more a case of good practice and guarding against a repeat of the global financial crisis in which some banks got into trouble and had to be bailed out using taxpayers’ money.
Russ Mould, investment director at AJ Bell said: “This isn’t to say the UK banks all have a clean bill of health. There are still places where they could do better, so it’s back to the gym for many of them, including HSBC which has identified areas for further improvement.
“The FTSE 100 fell 0.8% to 7,411 as commodity producers took a tumble thanks to Shanghai going back into lockdown, which might cause China to buy fewer commodities if the Covid flare-up lasts a long time.
“ProCook has served up a dog’s dinner of a trading statement, causing its share price to tumble to 48p and putting the stock 67% below the price of its IPO which happened a mere seven months ago.
“The pots and pans seller joined the stock market after a period of success where the nation was stuck at home during lockdown and many people embraced their culinary skills.
“Now we’ve got a squeeze on consumer spending and a lot of people have found they can only afford the essentials in life. So, the idea of buying a new cast iron frying pan or a new set of knives has been put on ice and ProCook’s growth expectations have been pared back.
“Companies that deliver profit warnings in their first year as a listed business typically find it takes a long time to win back the market’s favour, as investors distrust anyone dishing out bad news so soon after floating.”