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March 05, 2019

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.

 

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