The Bank of England (BoE) has published details of the scenarios for the stress tests that eight major UK banks and building societies will be undertaking this year. The details are set out in:
- key elements of the 2014 stress test; and
- guidance for participating firms.
In a related press release, the BoE explains that the “UK variant” stress scenario is not a forecast or expectation by the BoE regarding the likelihood of a set of events materialising. Instead, it is a coherent “tail risk” scenario designed specifically to assess the resilience of UK banks and building societies, predominantly to a very severe housing market shock, and to a sharp rise or snap back in interest rates.
The BoE will publish the results of the UK stress test in Q4 2014, after they have been through the appropriate governance channels, including the BoE’s Financial Policy Committee (FPC) and the PRA’s board. The UK results will be published after the results of the EU-wide stress test have been released. Ultimately, the results of the UK stress test will inform both system-wide policy interventions by the FPC and firm-specific supervisory actions by the PRA.
View Stress testing the UK banking system: key elements of the 2014 stress test, 29 April 2014
View Stress testing the UK banking system: guidance for participating firms, 29 April 2014