Britain’s biggest banks will be stress-tested against scenarios more severe than the 2008 financial crisis
Britain’s biggest banks will be stress-tested against scenarios more severe than the 2008 financial crisis.
The Bank of England will subject eight leading banks to a hypothetical scenario: the worst with 17% inflation in 2023, a 5% drop in GDP and 8.5% unemployment.
The tests will assess the impact of a series of global shocks, beginning in late June this year and spanning a five-year period.
Evidence: The Bank of England will put eight leading banks through a hypothetical scenario: the worst with 17% inflation in 2023, GDP falling to 5% and unemployment at 8.5%.
Banks will be tested against a 6% interest rate hike in early 2023 before being gradually lowered to below 3.5%.
He also imagines a housing market crash in which property prices will plummet by about a third.
The purpose is to establish that major lenders can “absorb rather than amplify” economic shocks, the Bank said.
He emphasized that the doomsday figures used for testing are not a forecast.
The test was last conducted in 2019. The eight facing the test are Barclays, HSBC, Lloyds, Nationwide, NatWest, Santander UK, Standard Chartered and Virgin Money UK, which together account for around 75 per cent of the loans in the UK.
