BoE Publishes Financial Stability Report and Stress Test Results
The Financial Policy Committee (FPC) of BoE published the financial stability report for 2018, including the results of its 2018 stress test for the banking sector in the UK. The report covers assessment of FPC on the outlook for the stability and resilience of the financial sector in the UK, along with the policy actions FPC advises to reduce and mitigate risks to stability. It also summarizes the activities of FPC over the reporting period and explains the extent to which FPC’s previous policy actions have succeeded in meeting its objectives.
Major UK banks have continued to strengthen their capital positions. They started the 2018 stress test with an aggregate common equity Tier 1 (CET1) capital ratio nearly three and a half times higher than before the global financial crisis. The 2018 stress test shows that the UK banking system is resilient to deep simultaneous recessions in the UK and global economies that are more severe overall than the global financial crisis and that are combined with large falls in asset prices and a separate stress of misconduct costs. The 2018 stress test is the first to be conducted under a new accounting standard, International Financial Reporting Standard 9 (IFRS 9). Furthermore, the results reveals that major UK banks have sufficient liquidity to withstand a major market disruption.
FPC has also reviewed a disorderly Brexit scenario, with no deal and no transition period, that leads to a severe economic shock. Based on a comparison of this scenario with the stress test, FPC judges that the UK banking system is strong enough to continue to serve UK households and businesses even in the event of a disorderly Brexit. FPC is maintaining the UK countercyclical capital buffer (CCyB) rate at 1%. It stands ready to move the UK CCyB rate in either direction as the risk environment evolves. Annexes 4 and 5 of this report set out the individual bank results and supervisory stance with respect to those banks. The results are presented for Barclays, HSBC Holdings, Lloyds Banking Group plc, Nationwide Building Society, The Royal Bank of Scotland plc, Santander UK Group Holdings plc, and Standard Chartered plc. FPC publishes the financial stability report twice a year.
Related Links
- Notification
- Results of Stress Test
- Effectiveness of Stress‑Testing Model Risk Management (PDF)
- Financial Stability Report (PDF)
- Data From Report (ZIP)
- Governor's Opening Remarks (PDF)
Keywords: Europe, UK, Banking, Financial Stability Report, Stress Testing, CCyB, IFRS 9, Brexit, BoE
Featured Experts
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Jun Chen
A well-recognized researcher in the field; offers many years of experience in the real estate finance industry, and leads research efforts in expanding credit risk analytics to commercial real estate.
Scott Dietz
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Previous Article
ECB Publishes Results of Financial Stability Review in May 2019Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.