Bank Of England: UK Largest Banks Are Ready For Hard Brexit
According to the results of the third consecutive year, all seven largest UK banks successfully passed stress tests that were introduced after the financial crisis of 2008; The Bank of England came to the conclusion that these financial institutions will be able to continue lending to consumers and businesses even in the face of a severe economic crisis; they will even cope with Britain’s withdrawal from the European Union without an agreement and with the world trade war, the British Central Bank is sure .
« Tests have shown that the UK banking system will survive in the event of a deep synchronous recession in the British and global economies – stronger than the global financial crisis, » the Bank of England said in a statement.
Stress tests included Barclays, Lloyds Banking, HSBC Holdings Plc, Nationwide Building Society, Royal Bank of Scotland Group Plc (RBS), Santander UK Group Holdings Plc and Standard Chartered Plc.
Nationwide did the best: in a negative test scenario, the bank’s core capital adequacy ratio (CET1) will drop to 13.1% from 31.7%, which is significantly higher than the regulatory requirements by 7.9%. RBS, Santander and Standard Chartered also showed very good results.
Barclays showed the least good performance because of the risks associated with « large credit card business in the UK and other countries, » the CBA said. In this bank, CET1 will fall to 8.9% in the event of a crisis from 13.2%.
However, none of the banks will pass the test without reducing dividend payments and bonuses. Therefore, the Bank of England warns that « investors must remember that this decline will become a necessity for banks » if a negative scenario materializes.