Bank of England stress tests banks and building societies
- Britain’s top banks and building societies are robust enough to keep lending if the economy were to shrink by 30% in the coronavirus pandemic, according to a stress test carried out by the Bank of England.
- The stress test was based on an economic scenario published by the BoE in its Monetary Policy Report (MPR) on Thursday, in which it said Britain was on course for the biggest economic slump in over 300 years.
- Under the MPR scenario, Britain’s GDP drops by almost 30% in the second quarter versus the fourth quarter of last year and recovers as lockdown restrictions are lifted.
- The BoE’s pared down, “desk top” stress test showed that banks have the capital buffers to withstand even greater losses than those that result from the MPR scenario, the BoE said in its interim Financial Stability Report (FSR).