(Bloomberg) -- The Bank of England will run two stress tests on the country's biggest lenders next year, an annual assessment of risks from the financial cycle and an “exploratory” scenario geared to “emerging or latent threats” to financial stability.
The central bank will publish the two scenarios in the first quarter of next year. The firms participating in the exercise will be the same seven that underwent the 2016 test.
Results of this year's health check will be published before the U.K. market opens on Nov. 30 along with the latest Financial Stability Report, the BOE said. The results will be decided and communicated to firms one day earlier, the central bank said.
The resilience of the British financial system continues to be “grounded on substantial capital and liquidity,” the BOE said on Monday in the report of the Financial Policy Committee's Sept. 20 meeting. The aggregate Tier 1 capital position of the U.K.'s major banks stood at 13.8 percent of risk-weighted assets in June, the BOE said.
The FPC noted that major British bank's equity prices remained around 20 percent lower than at the start of the year, reflecting “challenges to future profitability” arising from redress costs for past misconduct and weak investment banking profitability.
With regard to the U.K. vote to secede from the European Union, the BOE said it remains “committed to the implementation of robust prudential standards” for banks regardless of the country's future relationship with the bloc.
“This would require a level of resilience to be maintained that was at least as great as that currently planned, which itself exceeded that required by international baseline standards,” the central bank said.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Patrick Henry
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