UK’s seven largest banks pass BoE stress test

All of the UK’s seven major banks have passed the Bank of England’s stress test for the first time ever, offering a positive outlook even in the event of a “no-deal” Brexit.

The results mean UK banks would be able to continue lending even if Britain were to “abruptly” leave the European Union in 2019, CBNC reports.

Speaking to reporters today, BoE governor Mark Carney said: “Let’s be clear, this is a big call … Because we will be here in March 2019 in the unlikely event that we end up in a situation without a transition deal or without an agreement. So we are putting our money where our mouth is.”

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The test, first launched in 2014, is designed to ensure that banks are in possession of the right tools - such as sufficient liquidity and relatively strong capital positions - to weather an economic storm. The latest results show that all of the major UK banks are now in a position to “withstand a hard Brexit and still keep lending”, although Barclays and RBS did struggle, says The Times’s banking editor Katherine Griffiths.

The latter two only passed the hurdle rate set by the BoE because the regulator took account of efforts they had already made to increase their financial strength since the end of last year, when the tests were applied.

Brexit stress still lingers, however, Bloomberg says. The Bank told lenders to add an extra £6bn to their capital buffers, and may increase requirements again in 2018 over fears that the potential combination of a no-deal Brexit without a transition period, and a global recession, could “strangle the flow of credit to the economy”.