BOE Publishes Stricter Stress Testing Requirements

November 16th, 2015

BOE Publishes Stricter Stress Testing Requirements

The Bank of England (BOE) recently released the details of its plans to update its stress testing for 2016, 2017 and 2018.  The parameters for stress testing the United Kingdom’s (UK) largest banks will become tougher starting next year.  UK regulators will also begin collaborating with United States (US) regulators, including the Federal Reserve, to test US-based banks.  In a statement, Mark Carney, Governor of the BOE, said “The Bank of England is taking steps to ensure we can assess a range of future risks from a number of different sources to inform our micro- and macro-prudential policy decisions. Our approach embodies a comprehensive and detailed approach, a desire to deepen and strengthen our analysis, and the flexibility to respond to changing risks.”

The central bank published the five key features of their renewed approach for banks will more than £50 billion in total retail deposits.  In 2016, the BOE will introduce an annual cyclical scenario testing for domestic, global and market shocks. The stress tests will also assess the effectiveness of minimum capital requirements.  Finally, the BOE will work to advance its own modeling capabilities.

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BOE Press Release:

BOE Guidance:

Press: