LONDON: The Bank of England will assess the resilience of Britain’s seven biggest banks against a slump in the Chinese economy, a further drop in oil prices and a prolonged period of deflation in its second set of stress tests.
Banks such as HSBC Holdings Plc and Barclays Plc will also be examined on their resilience to shocks including “severe” market stress leading to reduced liquidity, the BOE said in a statement on Monday. Lenders must maintain a core tier one capital buffer of 4.5 percent of risk-weighted assets to pass, as well as a new 3 percent leverage ratio requirement.
The tests follow an assessment last year focusing on rising U.K. base rates and a house-price collapse. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, Britain’s two publicly owned lenders, barely passed the exams, while Co-Operative Bank Plc, which isn’t included this year, failed.
HSBC and Standard Chartered Plc, which had some of the highest core capital ratios in the 2014 test, will probably face a tougher ride this year as the central bank turns its attention to mounting risks abroad. The results will be published in the fourth quarter.
HSBC shares rose 0.5 percent to 581.20 pence at 10:36 a.m. in London. Standard Chartered advanced 0.6 percent, while Barclays gained 0.4 percent. The Bloomberg Europe Banks and Financial Services Index increased 1.1 percent.
