BoE Tests Banks Ability to Deal With Deep Recession

The Bank of England will subject the U.K.’s biggest lenders to a stress test featuring a deep economic slump and a sharp depreciation of the pound as the country prepares for the impact of withdrawal from the European Union.

While the BOE didn’t target Brexit by name in its 2017 health-check scenarios published on Monday, it said risks to financial stability will be influenced by the “orderliness” of that process. Separately, banks must submit their contingency plans to the BOE’s Financial Policy Committee for approval and oversight, as the regulator seeks to ensure the supply of credit won’t be disrupted even if firms lose untrammeled access to the single market.

U.K. output plunges 4.7 percent in the first year of the stress test’s adverse scenario that covers seven U.K. banks, including HSBC Holdings Plc and Barclays Plc. The regulator flagged “rapidly” rising household debt as a concern, and began an investigation into the quality of new consumer lending. It also asked banks to explain how they’ll have to alter their business plans if profitability doesn’t improve.

Bloomberg

USD/CAD – Lack of Fundamentals Leave Canadian Dollar Unchanged

Trumps Road to 100 Days of Inaction Rattles Markets

Week Ahead Trump Administration Fails with Healthcare Bill

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.