by Huw Jones
LONDON (Reuters) – Britain’s eight major banks have enough capital to cope with economic stress greater than that of the 2008 financial crisis, the Bank of England (BoE) said on Wednesday, as the sector struggles. in the face of a sharp rise in interest rates which is weighing on consumers and businesses.
The stress tests made it possible to verify that the banks held enough funds to cope with theoretical shocks, assuming a crisis more serious than that of 2008, when several banking establishments had to be bailed out. .
These stress tests also measured the ability of banks to cope with a rise in interest rates around the world.
The eight banks tested represent 75% of the sector in Great Britain.
“The results of the 2022/2023 Annual Cyclical Scenario (ACS) stress tests show that major UK banks are resilient under a severe stress scenario that incorporates sustainably higher inflation in advanced economies, an increase in interest rates around the world, simultaneous deep recessions combined with significantly higher unemployment in the UK and major economies, and sharp falls in asset prices,” the BoE wrote in a statement.
“The capital and liquidity positions of major UK banks remain robust and profitability has increased, allowing them both to improve their positions in this area and to support their customers,” continues the Bank of England. .
The issuing institution did not provide an overall score, but each bank had to overcome a specific obstacle. Barclays, Lloyds, HSBC, NatWest, Santander UK, Standard Chartered, Nationwide Building Society and Virgin Money did not show weakness in capital, the BoE said.
The Bank of England also indicated that it had decided to keep the rate of the countercyclical capital buffer (CCyB) imposed on banks unchanged.
“This will ensure that banks have sufficient capacity to absorb future shocks without unduly restricting credit,” the BoE said.
Britain’s economy has so far resisted rising interest rates, the BoE said.
Virgin Money, which passed the stress tests, said it plans to resume share buybacks this year.
On the London Stock Exchange, Virgin Money shares jumped 7.18%, while Barclays shares took 1.49%, Lloyds 2.76%, NatWest 1.44%, HSBC 1.43% and Standard Chartered 1 .50%.
NatWest, Britain’s largest bank dedicated to small businesses, said the stress tests highlighted the group’s positive balance sheet “regardless of the conditions”.
Lloyds, Nationwide, HSBC and Standard Chartered also highlighted their good performance following these tests.
The BoE is also studying, together with the Ministry of Finance, different scenarios for closing small banks, after recent events in the United States, including the collapse of Silicon Valley Bank.
“Deposit outflows from some U.S. regional banks have been large and rapid, with new technologies and social media playing a role in accelerating the rate at which information was shared and deposits withdrawn,” noted the BoE
(Reportage Huw Jones; Claude Chendjou, editing by Kate Entringer)
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