BoE published the annual cyclical scenario against which it will be stress testing banks in 2019, in addition to setting out the key elements of the 2019 stress test, guidance on the 2019 stress test, the variable paths for the 2019 stress test, and the traded risk scenario for the 2019 stress test. BoE also published the data templates and taxonomy for the concurrent stress testing exercise for 2019.
The 2019 annual cyclical scenario tests the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies, a financial market stress, and an independent stress of misconduct costs. Overall, the stress is more severe than the financial crisis. Banks are required to apply IFRS 9 in their starting position and throughout the projection period. BoE will collect both IFRS 9 transitional and non-transitional capital resources data for the 2019 stress test.
The 2019 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 2018 stress test. Unless agreed otherwise with BoE, participating banks should complete all aspects of the 2019 stress test. The templates used for collecting data, along with the document setting out definitions of data items, have been provided to participating banks.
The Financial Policy Committee (FPC) and Prudential Regulation Committee (PRC) judge the stress scenario to be appropriate, given the FPC assessment of the current risk environment. The stresses applied to the economic and financial market prices and measures of activity in the 2019 annual cyclical scenario have been adjusted, relative to the 2018 exercise, to take account of developments in the risk assessment of FPC.
Previous ArticleBCBS and IOSCO on Final Implementation Phases of Margin Requirements
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.
The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.
The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.