On December 16, 2019, the Bank of England (BoE)’s Prudential Regulatory Authority (PRA) published its annual stress test results and the Financial Policy Committee (FPC) published its Financial Stability Review. This report discusses the key elements of both.
Summary of results
Stress Test and Annual Cyclical Scenario (ACS)
Results marginally better than last year. The aggregate transitional Common Equity Tier 1 (CET1) ratio of the seven major UK banks was projected to decline from 14.5% at end-fiscal 2018 to a low point of 9.9% during fiscal 2020. The tier 1 leverage ratio was projected to decline from 5.6% to 4.8%.
All banks passed the stress test, but Barclays and Lloyds were estimated to have breached their AT1 triggers. Similar to last year’s results, for both banks the low-point CET1 capital ratios were estimated to fall below 7.0% under non-transitional measures. However, the PRA exempted them from capital actions. All other banks met their minimum thresholds comfortably (see table below).
