Good morning. We’re about to discover if Britain’s banking sector is strong enough to survive a new financial crisis.
Bank of England has put the UK’s seven biggest lenders through a series of rigorous tests to see how they’d cope if the economy hit the rocks.
The BoE’s stress tests model a serious financial downturn, at home and abroad.
They examine if banks have enough capital to handle a sharp fall in UK and global growth, a surge in consumer bad debts, a plunge in the pound, and a jump in unemployment caused by higher interest rates. It will also test their long-term financial resilience.
The seven lenders are Barclays, Royal Bank of Scotland, Lloyds, HSBC, Standard Chartered, Santander’s UK operations, and the Nationwide building society.
The results are released at 7am GMT, and will show which banks are best, and least, prepared for the next recession.
Banks whose exam paper comes back covered in red ink will face tough questions about their resilience. Any lender who actually fails the test forced to sell off assets or ask existing shareholders and bondholders for more cash.
Last year Royal Bank of Scotland fell short, so it’ll be under particular scrutiny this year. A poor performance could undermine the UK government’s attempt to sell its majority stake in RBS.
We already know that the lenders will suffer £30bn of losses on consumer loans under the tests. Today’s results will show where those losses are concentrated.
Adding to the fun, the Bank of England is also releasing its latest Financial Stability Report this morning. That will show the BoE’s view of the UK financial system, and the key threats to financial stability.
Our City editor Jill Treanor is locked in the Bank of England, reading the stress test now ahead of 7am. Here’s her preview:
Here’s the agenda
7am GMT: UK bank stress tests released
7.30am GMT: Bank of England governor Mark Carney holds a press conference. He’ll discuss the stress test results and the BoE’s financial stability report
10am GMT: OECD releases its latest economic outlook
1.30pm GMT: US trade balance for October
2.45pm GMT: Federal reserve chair nominee Jay Powell’s confirmation hearing at the US Senate