UK Banks pass no-deal Brexit stress tests

Written by Oliver Wade
29/11/2018

All of the UK’s largest banks passed intensive stress tests as the Bank of England (BoE) heralded the resilience of the UK’s financial system, it was revealed yesterday.

Nationwide, Santander UK, HSBC, Standard Chartered, Lloyds, Barclays and RBS all passed the enhanced stress test conducted by the BoE, and had three and a half times the capital ratio than before the financial crisis.

The stress test applied a scenario that included global GDP falling by 2.4 per cent, UK GDP dropping 4.7 per cent, house prices plummeting by 33 per cent and unemployment levels surging to 9.5 per cent, pushing the British lenders to their limits.

Furthermore, the stress test included a sudden loss of overseas investor appetite for UK assets and a 27 per cent fall in the sterling exchange index, along with the bank’s base rate increasing to 4 per cent.

The Financial Policy Committee (FPC) said it was satisfied the banks could continue to serve UK households and businesses, even in the event of a no-deal Brexit and no transition period.

The test found that the banks would suffer from losses equating to £70bn, but would still be able to function without the requirement to raise more capital.

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