Deloitte comments on the Bank of England’s approach to stress testing the UK banking system

Clifford Smout, partner, EMEA Centre for Regulatory Strategy, Deloitte:

"A number of smaller banks and foreign bank subsidiaries will probably be relieved that they will not be covered by these requirements for now."

"For those banks still involved, it is good that the data requirements will be locked down, and that the Bank of England will explore synergies in data collection across jurisdictions. This will help firms to invest in long term solutions."

"For those banks still in scope, though, the complexity of running the exercise is significant. Running these tests in parallel with the EU exercise next year will be a real challenge. Some banks will also input into the IMF’s UK FSAP review."

"The decision that hurdle (or ‘pass’) rates will be linked to internal capital requirements for each bank is interesting. It will make market interpretation of results harder, since these hurdles differ bank by bank and are typically not published. And since these hurdles are set at levels above the internationally-agreed minima, it is also going to make passing the tests harder."

End

Notes to editors

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