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Britain’s largest banks to be stress-tested against scenarios more severe than the 2008 financial crisis
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Britain’s largest banks will be subject to a stress test 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 inflation of 17 percent in 2023, GDP falling to 5 percent and unemployment of 8.5 percent.
The tests will assess the impact of a series of global shocks, starting from the end of June this year and over a five-year period.
Tests: The Bank of England will subject eight leading banks to a hypothetical scenario – the worst with inflation of 17% in 2023, GDP falling to 5% and unemployment of 8.5%
Banks will be tested against interest rates rising to 6 percent in early 2023, before gradually being lowered to less than 3.5 percent.
It also envisions a housing market crash, with property prices falling by about a third.
The aim is to establish that large lenders can absorb economic shocks instead of amplifying them, according to the Bank.
It stressed that the doomsday scenarios used for the tests are not predictions.
The test was last conducted in 2019. The eight undergoing the test are Barclays, HSBC, Lloyds, Nationwide, NatWest, Santander UK, Standard Chartered and Virgin Money UK – together accounting for around 75 per cent of UK lending.