Featured Product

    BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK

    January 20, 2021

    BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test. BoE also published the data templates and dictionary for the solvency stress testing and taxonomy for the XBRL concurrent stress testing exercise for 2021. The 2021 stress test will cover the eight listed major banks and building societies: Barclays, HSBC Holdings, Lloyds Banking Group, Nationwide, NatWest Group, Santander UK Group Holdings, Standard Chartered, and Virgin Money UK. Although ring-fenced subgroups are not in scope for the 2021 stress test, BoE expects to include the ring-fenced subgroups of stress test participants in the 2022 test.

    The 2021 solvency stress test will assess the major UK banks and building societies against a UK and a global scenario that reflects a severe path for the current macroeconomic outlook. The 2021 solvency stress test will test banks’ end-2020 balance sheets to a scenario similar to that generated by the reverse stress test. The timetable for the 2021 solvency stress test will be staggered. Participating banks will be required to submit projections for credit impairments and credit risk-weighted assets in April, rather than the usual timing of June. This will help inform further analysis by BoE in the first half of the year. The additional stressed projections will be submitted in June, as usual, with bank-specific results published in the fourth quarter of 2021. To help facilitate this change to the usual timetable, and in recognition of ongoing operational challenges within participating banks, banks will not be requested to submit baseline projections and the ring-fenced subgroups of stress-test participants will not be included in the 2021 stress test. Although the qualitative review will continue to be an important component of the 2021 stress test, the scope of this year’s exercise will be adapted according to the situation.

    The results of the 2021 solvency stress test will act as a cross-check on the Financial Policy Committee (FPC) judgment of how severe the current stress would need to be to jeopardize resilience of banks and challenge their ability to absorb losses and continue to lend. The test will, therefore, cross-check the judgment that the banking system is resilient to a reasonable worst-case stress in the current environment. It will also support the PRA objective of promoting the safety and soundness of PRA-regulated firms. The outcome of the test will be used to update the FPC judgments about the most appropriate ways in which the banking system can continue to support the economy through the stress. It will also be used as an input into the transition of PRA back to its standard approach to capital-setting and shareholder distributions through 2021.


    Related Links

    Keywords: Europe, UK, Banking, Stress Testing, Credit Risk, 2021 Stress Test, Basel, BoE

    Featured Experts
    Related Articles

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806