Britain’s biggest lenders could withstand a “disorderly” Brexit and none need to bolster their financial strength after this year’s health check of the sector for the first time since it was launched in 2014, according to the Bank of England.
But Barclays and Royal Bank of Scotland have emerged as the weakest of the seven lenders tested and only passed thanks to action they have taken over the year to bolster their financial strength.
The Bank’s stress tests results showed the UK’s banking system could cope with an extreme economic stress scenario, equivalent to the worst possible outcome of the UK’s departure from the EU.
Banks could absorb £350 billion of losses over the next few years and still lend to support the economy.
But the Bank warned that it would need to look at whether banks needed to boost their financial balance sheet strength in case a “disorderly” Brexit was to coincide with a wider severe global recession.
In its bi-annual Financial Stability Report, the Bank said: “In such circumstances, capital buffers would be drawn down substantially more than in the stress test and, as a result, banks would be more likely to restrict lending to the real economy.”
Governor Mark Carney said the Bank’s Financial Policy Committee was “taking action to ensure the financial system is resilient to a very broad range of risks so that the people of the United Kingdom can move forward with confidence that they can access the financial services they will need to seize the opportunities ahead”.