Deloitte comments on the Bank of England stress test results
16 December 2014
The Bank of England this morning announced the results of the first stress testing exercise under its new framework. Clifford Smout, Partner, Deloitte EMEA Centre for Regulatory Strategy, said:
“The results of the stress testing exercise are themselves important, but once they have been pored over, attention will turn to how the exercise will evolve. There is a growing trend for supervisory stress testing exercises to increase in intensity over time. The Bank of England makes clear in its comments today that the UK exercise will be no exception.
“For the banks and building societies that participated in this year’s exercise, there is significant work to do to address shortcomings in qualitative aspects of their approach to stress testing. Similar themes emerged from the EBA and US stress testing exercises carried out earlier this year.
“Although participation in the exercise will not be extended in 2015, a number of medium-sized UK banks and overseas banks operating in the UK will be looking to understand how to start to prepare for future involvement. Both face particular challenges. Medium-sized banks hope that requirements previously applied to only the largest banks are adjusted to reflect their size. Overseas banks will have to tackle the challenge of maintaining consistency between the UK exercise and any tests applied to their group.”
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