Banking

Britain’s biggest banks tfacing even tougher stress tests

Britain’s biggest banks to be stress-tested against scenarios more severe than 2008 financial crisis

Britain’s biggest banks will be stress-tested against scenarios more severe than the 2008 financial crisis.

The Bank of England will subject eight leading banks to a hypothetical scenario – the worst featuring inflation at 17 per cent in 2023, GDP falling to 5 per cent, and unemployment of 8.5 per cent.

The tests will assess the impact of a series of global shocks, starting from the end of June this year and spanning a five-year period.

Tests: The Bank of England will subject eight leading banks to a hypothetical scenario – the worst featuring inflation at 17% in 2023, GDP falling to 5%, and unemployment of 8.5%

Banks will be tested against interest rates spiking to 6 per cent in early 2023 before gradually reducing to under 3.5 per cent.

It also imagines a housing market crash where property prices will plummet by around one third.

The purpose is to establish that major lenders can ‘absorb rather than amplify’ economic shocks, the Bank said.

It emphasised that the doomsday figures used for the tests are not a forecast.

The test was last conducted in 2019. The eight facing the test are Barclays, HSBC, Lloyds, Nationwide, NatWest, Santander UK, Standard Chartered and Virgin Money UK – collectively accounting for around 75 per cent of lending in the UK.

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