UK Bank Stress Test Include Global Economic Slump

The UK banking industry will have to prove it can endure a global economic slump in this year’s Bank of England stress tests.

The Bank has set out the parameters of this year’s stress test, which include a collapse in economic growth in China and a sharp downturn in the eurozone.
The test imagines a sharp contraction in eurozone economic growth and Chinese expansion of just 1.7%.
China’s economy expanded by 7.4% in 2014 – the slowest pace for 24 years.

Economic growth of just 1.7% would plunge Hong Kong into a deep recession that would cause house prices on the island to collapse by 40%, hitting UK lenders such as HSBC.
Bank and building societies will also have to prove they have the capital resources to withstand a 2% fall in economic output in the eurozone.
In addition the stress tests imagine a scenario in which the UK economy contracts by 2.3%.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza