Published: Thu, November 30, 2017
Markets | By Rosalie Gross

All seven United Kingdom major banks pass BoE stress tests

All seven United Kingdom major banks pass BoE stress tests

Britain's biggest lenders could withstand a "disorderly" Brexit and none need to bolster their financial strength after this year's health check of the sector for the first time since it was launched in 2014, according to the Bank of England.

Banks, meanwhile, incur losses of about £50bn in the first two years of the stress.

The central bank ruled however that the nation's seven top retail banks must hold another £6 billion in combined capital reserves to safeguard against crisis.

Threadneedle Street officials said they were aware that the potential risks deriving from a hard Brexit, coupled with the threat of a global recession and hefty fines from global regulators, could put the banking sector under enormous pressure.

"The UK banking system could continue to support the real economy through a disorderly Brexit", said the Bank's financial policy committee. There are concerns a deadlock in the talks could see Britain leave without a trade deal in place, potentially causing severe disruption to its economy.

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Britain's seven major lenders - HSBC, Nationwide, Barclays, Royal Bank of Scotland, Lloyds, Standard Chartered and the United Kingdom arm of Santander - would incur losses of about £50bn each in the hypothetical scenario the BoE analysed.

Carney added a disorderly Brexit - one in which no trading relationship is arranged - is "not a good scenario".

The Bank's stress tests results showed the UK's banking system could cope with an extreme economic stress scenario, equivalent to the worst possible outcome of the UK's departure from the EU. Barclays and RBS, however, fell below their minimum capital levels in the stressed scenario.

However, the pair passed the latest tests as they have already taken action to strengthen their balance sheets since the end of a year ago.

The Governor of the Bank of England, Mark Carney, smiles at the "Future Forum 2017" event in St George's Hall, Liverpool, Britain November 16, 2017.

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