Banks pass the Brexit test

BANK bosses are breathing a sigh of relief after surviving a doomsday scenario dreamed up by the Bank of England.

It tested Barclays, HSBC, Lloyds, Nationwide, Santander UK, Standard chartered and RBS to see how they would cope in a severe recession or a ‘disorderly Brexit’ without a trade deal.

They were asked to examine the impact of a surge in unemployment to 9.5pc, a 33pc fall in house prices and a 2.4pc contraction of the global economy.

although the businesses would lose £50bn between them, the only two that would run dangerously low on cash are Barclays and Natwest owner RBS.

The Bank said both have already set aside enough money that if the tests were rerun they would pass. There are no looming risks to growth at present apart from uncertainties relating to Brexit, the Bank said.

It is asking lenders to hold on to £5.8bn more under a fund which is built up in normal times to guard against any unexpected downturn. The banks already have this much spare money in their reserves, so they will not have to raise anything else from shareholders. The Bank also asked lenders to think about the impact that long-term economic weakness might have on their financial performance. It told them to consider what would happen if interest rates are close to zero until 2023, at the same time as they face growing competition from internet companies.

although the details of each bank’s plans were not published, they said they would seek to tackle the problem through aggressive cost cuts and improving their own technology systems.