Two stress tests give conflicting verdicts on UK banks
Under the BoE’s severe stress scenario, the average drop to UK banks’ CET1 capital ratios was 740bp, compared with 570bp under the EBA’s adverse scenario
The Bank of England’s stress tests proved more of a challenge to UK lenders than the European Banking Authority’s (EBA) iteration, Risk Quantum analysis shows.
Under the BoE’s severe stress scenario for 2018, the average drop to UK banks’ Common Equity Tier 1 (CET1) capital ratios was 740 basis points, compared with 570bp under the EBA’s adverse scenario. The average includes Barclays, Lloyds, HSBC and RBS, the four UK banks included in both tests.
However, the BoE stress tests allow banks to
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