Banks undergo new stress test

THE ability of Britain’s big banks to withstand global economic shockwaves including a dramatic slowdown in China and further defl ation in the eurozone is to be assessed by the Bank of England in a new set of stress tests.

How they continue to oil the wheels of the UK economy and maintain their fi nancial strength amid a theoretical global downturn will turn the spotlight on HSBC and Standard Chartered, both with big exposure to Asia and other developing economies.

Others under scrutiny are Barclays, Lloyds Banking Group and Royal Bank of Scotland, Sant ander UK and Nationwide building society.

The Co- op Bank, which was the only lender to fail last year’s health check, has not been asked to take part because its balance sheet has shrunk and it will have “a more limited role in payment systems in the future”. The test covers a period of deteriorating conditions from now until the end of 2019, envisaging a drop in the price of oil to $ 38- a- barrel from its current level around $ 56 and Chinese GDP slowing to 1.7 per cent from its target for this year of about 7 per cent. The Bank said the scenario is not a forecast of macroeconomic and fi nancial conditions nor a set of events that is expected or likely to materialise, but it would inform UK regulators on the resilience on the banking system.

Bank of England governor Mark Carney, pictured, said: “Last year’s stress tests demonstrated how much stronger the core of the UK fi nancial system has become since the fi nancial crisis. This will improve further our ability to identify vulnerabilities. ”