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.
- 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
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.
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.