The Bank of Englands health check on banks this year will seek to ensure that Britains big lenders, including HSBC, and Barclays, can continue supporting the economy during the pandemic and will also look at how banks can return to more normal dividend levels.
Last year, the British central bank cancelled its annual stress test of banks so they could focus on keeping credit flowing to an economy hit by its worst downturn in 300 years due to COVID19 lockdowns.
The test usually focuses on banks ability to face big theoretical shocks, but the focus has changed given that the economy is facing real stresses from the pandemic, the BoE said.
At this point stress tests are used to assess whether the buffers of capital that banks have built up are large enough to deal with how the prevailing stress could unfold, the BoE said in a statement.
Banks that will be tested this year also include Lloyds, NatWest, Standard Chartered, and Nationwide Building Society. Virgin Money UK will take part for the first time.
The BoE said this years test of the leading banks will be conducted in a staggered way, with banks submitting their initial projections earlier in April on coping with a range of market shocks without going below bespoke minimum capital levels.
The stress test scenario includes a second dip in economic growth in 20212025 on top of the one seen last year, with UK residential property prices crashing by a third and unemployment surging to just under 12.
The scenario also…