Wednesday 28 November 2018 4:55 pm

Major UK banks pass ‘worst case scenario’ no-deal Brexit stress tests

Reporter at City A.M. covering banking, markets and insurance

Reporter at City A.M. covering banking, markets and insurance

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All of the UK’s major banks passed a beefed-up stress test as the Bank of England heralded the resilience of the UK financial system, it was revealed today.

The seven banks – Nationwide, Santander UK, HSBC, Standard Chartered, Lloyds, Barclays, and RBS – had three and half times the capital ratio than before the global financial crisis, the bank said.

The Bank of England’s stress test applies a scenario that includes global GDP falling 2.4 per cent, UK GDP dropping 4.7 per cent, house prices falling 33 per cent and unemployment surging to 9.5 per cent, to test the financial mettle of UK banks.

The stress test also included a sudden a loss of overseas investor appetite for UK assets and a 27 per cent fall in the sterling exchange index as well as the bank rate rising to four per cent.

The Financial Policy Committee said it was satisfied the banks could continue to serve UK households and businesses even in the event of no deal and no transition period.

The test found that the banks would suffer £70bn losses but still be able to weather the storm without raising more capital.