BoE: Major UK Banks Clear 2017 Stress Test

Banks could support UK economy in disorderly Brexit BoE

"The stress-test scenario... encompa-sses a wide range of United Kingdom macroeconomic risks that could be associated with Brexit", read a statement from the BoE's Financial Policy Committee (FPC).

In the test, banks incur losses of around GBP 50 billion in the first two years of the stress.

"The stress-test scenario ... encompasses a wide range of United Kingdom macroeconomic risks that could be associated with Brexit", read a statement from the BoE's Financial Policy Committee (FPC).

"This scale of loss, relative to their assets, would have wiped out the common equity capital base of the United Kingdom banking system ten years ago", the Bank said, adding that the tests showed losses on such a scale could now be absorbed.

Meanwhile, a "no deal" Brexit scenario would cause an "economic impact on households and businesses", Carney said.

Britain will leave the European Union in March 2019 after the nation voted past year to leave the bloc, but the terms of its exit and future trade relationship are under negotiation.

The North could stay in European Union after Brexit, lawyers suggest
Neither side wants a "hard border" but there has been no agreement so far on how this could be achieved. Lost? Does she think we had a vote in Brexit?

That scenario, which formed the core of the Bank's half-yearly review of the financial system, included a 4.7% fall in UK GDP, a 33% fall in house prices, interest rates rising to 4% and a 27% fall in the pound.

However, the FPC said combination of a disorderly Brexit and a severe global recession and stressed misconduct costs could result in more severe conditions than in the stress test.

The Bank of England added Tuesday that all seven lenders passed its stress assessments for the first time since it began testing in 2014, and are "resilient" to recession. However, Barclays and RBS, which remains 70%-owned by the taxpayer, only passed the test because the BoE took into account its efforts to raise capital since the end of a year ago.

Speaking at the Bank's stress tests of the financial system, Carney said United Kingdom banks would be able to withstand even the most disorderly Brexit process without stopping lending to the economy, but he reiterated his plea for negotiators to avoid that situation.

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.

Spreadex financial analyst Connor Campbell suggested the tests proved the position of Britain's financial sector had improved considerably over the last decade.

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