Bank of England stress tests: This is how the lenders reacted

 
Caitlin Morrison
Follow Caitlin
BRITAIN-ECONOMY-BOE-INFLATION-RATE-BANK-FOREX
The Bank of England revealed the results of its stress tests today (Source: Getty)

The Bank of England unveiled the results of its latest round of stress tests today, and presented a fairly upbeat outlook on the state of the market.

Barclays and RBS were the only lenders to fall below the Bank's systemic reference points, and in the main, the BoE said banks would incur losses of £50bn within the first two years of Threadneedle Street's main stress test scenario, which include a massive fall in house prices, a global recession, and a four per cent interest rate.

Here's how the lenders reacted to today's test results:

Royal Bank of Scotland

"We continue to make progress towards the stress resilient bank we aspire to be. 2017 represented another year of material improvement with our peak-to-trough stress resilience improving by 300bps from last year's stress test," said Ewen Stevenson, chief financial officer.

"Until we have resolved our remaining major legacy conduct issues and non-core portfolio interests, we will continue to show stress test results weaker than our long term targets."

Barclays

The lender acknowledged that the minimum stressed CET1 ratio occurred in 2018 of the test period, and was below the systemic reference point for that year of 7.9 per cent. However, Barclays said it was not asked to submit a revised capital plan by the BoE in light of the steps already taken during 2017 to strengthen its capital position.

Lloyds Banking Group

Lloyds said the scenario in this round of tests was "the most severe stress for the group since inception of the BoE stress tests".

The bank added: "Despite the severity of the stress, the group exceeds the capital and leverage thresholds set out for the purpose of the stress test before the application of any management actions; therefore, the group is not required to take any capital action as a result of this stress test."

HSBC

The outcome of the stress tests demonstrates the group's continued capital strength, HSBC said.

"The results incorporate strategic management actions, including CRD IV restrictions, that have been accepted by the Bank of England for the purposes of this exercise," the lender continued.

Under adverse economic circumstances, we would in practice consider a variety of management actions depending on the particular prevailing circumstances. Our intention, as evidenced by past actions, is to maintain a conservative and prudent stance on capital management.

Standard Chartered

"The group has a strong and liquid balance sheet and these results demonstrate the benefits of the actions recently undertaken by the group to improve its resilience to an extreme stress scenario," StanChart said.

Related articles