28th November 2017.

UK Biggest Lenders Pass Stress Test

Britain’s big banks can withstand a hard Brexit and still keep lending, according to results from The Bank of England’s latest stress tests.

For the first time since the financial crisis, all of the UK’s biggest lenders have passed the Bank’s stress tests.

Every year, since 2014, the Bank of England test banks on how resilient they would be in the event of a global economic catastrophe.

The process, known as stress testing, sees how much the UK’s biggest banks would lose under different scenarios, and whether they have enough capital to survive those losses.

The Bank of England called this year’s test “tough”, offering the lenders worst case scenarios such as the UK crashing out of the European Union, sterling slumping, interest rates rising to 4 per cent and a record housing crash.

The Bank  introduced the annual stress tests to make the banking system safer and to avoid further taxpayer bailouts.

Banks lost £50 billion in two years in the latest test’s scenario. Unemployment also rose to 9.5 per cent, sterling fell 27 per cent, the base rate rose to 4 per cent and property prices fell by a third. UK GDP fell by 4.7 per cent and world GDP by 2.4 per cent.

Michael Snapes, financial services director at PwC, commented on the recent results of the tests: “There is some comfort to be had in the knowledge that the UK banking system is strong enough to withstand a severe economic deterioration”.

“The results suggest that the major UK banks may finally be emerging fully from their post-crisis downturn.”

The Credit Protection Association supports this testing of UK banking. This allows banks to prepare for economic collapses now when the economy is benign so that they can withstand difficulties when they occur. The fallout from the 2008 economic crisis  is still felt today by many of our Members, so preparing precautionary measures now is essential. 

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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