Stress testing the UK banking system - December 2015: two large banks failed to pass the tests.
Barclays PLC, HSBC Holdings PLC, Lloyds Banking Group PLC, Nationwide Building Society and Santander UK They have passed "Stress testing" of the Bank of England asset valuation and current financial condition.
BoE said that capital requirements will not continue up because most UK banks have already achieved the target levels of "Tier 1 capital" (which is the ratio between the Bank's Core Equity capital and Total Risk-weighted assets) at a level of 11% of risk weighted assets (RWA over a period up to 2019).
The PRA Board sees the main risks to the UK banking system in emerging markets and the deficit in current account balance. Stress tests are based on dynamic simulations for tolerance to risk mainly against bank debt exposures and off-balance sheet assets, provided as the Eurozone and China fall into general recession, the prices of commodities fall drastically, energy too, and banks face massive delinquency.
Meanwhile this, the Bank of England said it is ready to take action to cool the buy-to-let housing market as it put UK banks on notice that they could be forced to hold up to £10bn of capital in anticipation of an economic downturn.
The UK Stress testing results should be a positive sign for investors in the UK.
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