March 16, 2018

BoE published the scenario against which it will be stress-testing banks in 2018, in addition to setting out the key elements of the 2018 stress test, guidance on the 2018 stress test, the variable paths for the 2018 stress test, and the traded risk scenario for the 2018 stress test. The 2018 annual cyclical scenario (ACS) tests the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies, large falls in asset prices, and a separate stress of misconduct costs.

The 2018 stress test will cover seven major UK banks and building societies: Barclays, HSBC, Lloyds Banking Group, Nationwide, The Royal Bank of Scotland Group, Santander UK Group Holdings plc, and Standard Chartered. This is the same group of banks that participated in the 2017 stress test. Additionally, the stresses applied to the economic and financial market prices and measures of activity in the 2018 ACS will be the same as in the 2017 test. BoE will collect both IFRS 9 "transitional" and "fully loaded" capital resources data for the 2018 stress test. Firms using transitional arrangements are required to adjust the calculations of regulatory capital/leverage, which are directly affected by expected credit loss provisions, as prescribed by the Capital Requirements Regulation, or CRR

The results of the 2018 ACS will be published in the fourth quarter of 2018. The aggregate results will be incorporated into the Financial Stability Report, with bank-specific disclosures published separately on the BoE website.

 

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Keywords: Europe, UK, Banking, Stress Testing, Scenarios, IFRS 9, Stress Test 2018, BoE

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