BoE stress test shows UK banks are 'resilient' to 'severe' scenarios
The findings come after the collapse of Silicon Valley Bank in the US in Q1 occurred at the same time as Credit Suisse's collapse, triggering concerns about the health of the wider banking sector.
The Annual Cyclical Scenario examined the capabilities of the UK's retail banks to withstand a variety of macroeconomic pressures «more severe than the 2007-08 global financial crisis».
According to the Bank of England: «UK banks would be resilient to a severe stress scenario that incorporated persistently higher advanced-economy inflation, increasing global interest rates, deep and simultaneous recessions in the UK and global economies with materially higher unemployment, and sharp falls in asset prices.»
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The test was run under the guidance of the Financial Policy Committee (FPC) and Prudential Regulation Committee (PRC) and the BoE states it was not a forecast of upcoming headwinds, but a «coherent ‘tail-risk' scenario designed to be severe and broad enough to assess the resilience of UK banks to a range of severe adverse shocks».
The findings come after the collapse of Silicon Valley Bank in the US in Q1 occurred at the same time as Credit Suisse's collapse, triggering concerns about the health of the wider banking sector.
Andrew Bailey and Jeremy Hunt vow to bring inflation down
Governor of the BoE Andrew Bailey has continuously defended the security of UK banks amid the turmoil.
The last stress test was carried out in 2019, and the BoE said UK banks entered this one at a better starting position than the last one, with «improved asset quality… following increases in residential property prices, more conservative lending standards and changes in
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