This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.bbc.co.uk/news/business-30491161
The article has changed 6 times. There is an RSS feed of changes available.
Version 2 | Version 3 |
---|---|
Co-op Bank fails Bank of England stress tests | Co-op Bank fails Bank of England stress tests |
(about 2 hours later) | |
The Co-operative Bank has failed a "stress test" by the Bank of England that assessed major UK lenders' ability to withstand another financial crisis. | The Co-operative Bank has failed a "stress test" by the Bank of England that assessed major UK lenders' ability to withstand another financial crisis. |
A further two banks - Lloyds Banking Group and Royal Bank of Scotland - were found to be at risk in the event of a "severe economic downturn". | A further two banks - Lloyds Banking Group and Royal Bank of Scotland - were found to be at risk in the event of a "severe economic downturn". |
The Bank of England tested the lenders' resilience to a 35% fall in house prices, and a 30% drop in the value of the pound, among other factors. | The Bank of England tested the lenders' resilience to a 35% fall in house prices, and a 30% drop in the value of the pound, among other factors. |
Five major banks passed the test. | Five major banks passed the test. |
The results show that the banking system is "significantly more resilient", said Bank of England governor Mark Carney, and that the "growing confidence in the system is merited". | The results show that the banking system is "significantly more resilient", said Bank of England governor Mark Carney, and that the "growing confidence in the system is merited". |
"This was a demanding test," he added. | "This was a demanding test," he added. |
Stress test scenario | Stress test scenario |
In the first test of its kind, eight UK banks and building societies were assessed by the Prudential Regulation Authority, which is a part of the Bank of England. | In the first test of its kind, eight UK banks and building societies were assessed by the Prudential Regulation Authority, which is a part of the Bank of England. |
HSBC, Barclays, Santander, Standard Chartered and Nationwide all passed. | HSBC, Barclays, Santander, Standard Chartered and Nationwide all passed. |
The doomsday scenario mapped out by the Bank of England included an unemployment rate of nearly 12%, inflation rising to more than 6%, and interest rates rising to 4.2%. | The doomsday scenario mapped out by the Bank of England included an unemployment rate of nearly 12%, inflation rising to more than 6%, and interest rates rising to 4.2%. |
The Bank emphasised that the scenario was "extreme", and was not likely to materialise. | The Bank emphasised that the scenario was "extreme", and was not likely to materialise. |
'No surprise' | 'No surprise' |
The Co-operative Bank, which had to be rescued last year after a £1.5bn black hole was found in its balance sheet, was the only bank deemed to require a "revised capital plan". | The Co-operative Bank, which had to be rescued last year after a £1.5bn black hole was found in its balance sheet, was the only bank deemed to require a "revised capital plan". |
The chief executive of Co-operative Bank, Niall Booker, said it was "no surprise" that the lender had not passed the test, but said the Bank was on track to "significantly reduce risk-weighted assets". | The chief executive of Co-operative Bank, Niall Booker, said it was "no surprise" that the lender had not passed the test, but said the Bank was on track to "significantly reduce risk-weighted assets". |
The Co-op also said that its restructuring plans meant it would not make a profit until 2017, at the least. | |
The Royal Bank of Scotland and Lloyds Banking Group - both of which were bailed out by the taxpayer during the financial crisis - were found to be in need of further strengthening. | |
But the Bank of England stopped short of requiring them to submit new plans, as both lenders are already taking action to reduce risks. | But the Bank of England stopped short of requiring them to submit new plans, as both lenders are already taking action to reduce risks. |
There is a safety net in place in the UK for customers' money were any bank, building society or credit union to go bust. | |
The Financial Services Compensation Scheme protects the first £85,000 of savings per person, per institution. | |
The Bank of England's stress tests built on similar health checks by the European Banking Authority (EBA) in October. | The Bank of England's stress tests built on similar health checks by the European Banking Authority (EBA) in October. |
The EBA found that 24 European banks needed to shore up their finances. | |
Four UK banks were subjected to the EBA test: Royal Bank of Scotland, HSBC, Lloyds Banking Group and Barclays. They all passed. | Four UK banks were subjected to the EBA test: Royal Bank of Scotland, HSBC, Lloyds Banking Group and Barclays. They all passed. |
The Bank of England will submit UK banks to an annual stress test henceforth. | |
Analysis: Kamal Ahmed, BBC business editor | Analysis: Kamal Ahmed, BBC business editor |
The Bank of England has made it clear that its doomsday scenario is not something that it thinks is likely to happen at the moment. | The Bank of England has made it clear that its doomsday scenario is not something that it thinks is likely to happen at the moment. |
It is an attempt to replicate the bad news piled upon bad news such as occurred in 2008. | It is an attempt to replicate the bad news piled upon bad news such as occurred in 2008. |
And given that the present risks in the economy include a collapse in the oil price and possible deflation in the eurozone, some argue that the Bank is testing the wrong thing. | And given that the present risks in the economy include a collapse in the oil price and possible deflation in the eurozone, some argue that the Bank is testing the wrong thing. |
Read Kamal's blog in full. | Read Kamal's blog in full. |