HSBC, Royal Bank of Scotland, Lloyds and Barclays can breathe a sigh of relief: the big four of British credit have passed the Bank of England stress tests. He also promoted Santander UK, Standard Chartered and the Nationwide Building Society. The only institution rejected is Cooperative Bank, which will need a capital boost.
The BoE's Prudential Regulation Authority has tested Britain's eight largest lenders to assess their resilience to a hypothetical three-year economic collapse. A particular case is that of Royal Bank of Scotland and Lloyds, which are partly controlled by the state and have narrowly passed the test, as both need to strengthen capital, but have already started plans to do so.
The review, which follows that carried out at the level of the entire EU by the European Banking Authority (EBA), "was specifically designed to assess domestic risks", explains the BoE.
Based on the Central Bank's final projections, the stress scenario would reduce the Common Equity Tier 1 ratio (Cet1) of the eight banks from an average of 10% in 2013 to a minimum of 7,3% in 2015, without taking into account the potential effects of strategic initiatives taken by banks to mitigate the effects of stress on their balance sheets.
In any case, including also the already envisaged capital strengthening plans, "the results of the stress tests indicate that the British banking system would have the ability to maintain its central functions in a stress scenario", writes the Bank of England.
"It was a tough test - commented the Governor of the Bank of England, Mark Carney - and the results show that the core of the British banking system has greater resilience capacity, i.e. that it has the strength to continue to serve the real economy even under conditions of severe stress and that the growing trust in the system is deserved”.
