BoE Publishes Key Elements of the 2019 Stress Testing for Banks in UK
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.
Related Links
- News Release
- Key Elements of Stress Test (PDF)
- Guidance for Stress Test (PDF)
- Variable Paths for Stress Test (XLSX)
- Traded Risk Scenario (XLSX)
- Data Templates and Taxonomy for Concurrent Exercise
Keywords: Europe, UK, Banking, Stress Testing, Annual Cyclical Scenario, Stress Test 2019, IFRS 9, Misconduct Risk, BoE
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Previous Article
CBB Updates Its Rulebook for Islamic and Conventional BanksRelated Articles
PRA and FPC Finalize Changes to Leverage Ratio Framework in UK
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
CFPB Proposes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
PRA Decides to Maintain O-SII Buffers for Another Year
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
FSB Report Assesses Implementation of Recommendations on Stablecoins
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
APRA Updates Loan Serviceability Expectations for Home Lending
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
EBA and EIOPA Set Out Work Priorities for 2022
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
MFSA Issues Reporting Updates and Guidance for Banks
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
EC Publishes Decision on List of Equivalent Third Countries Under CRR
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC Rule on Contractual Recognition of Write-Down and Conversion Powers
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.
