Britain’s biggest lenders can withstand a combined hit of £125bn on their loan books, the Bank of England’s latest annual stress test has found.
The scenario included a further 45% drop in commercial real estate values, a 31% collapse in residential property prices, a rise in unemployment to 8.5%, a 5% contraction in the UK’s gross domestic product and a 2.5% fall in global GDP.
Threadneedle Street said none of the eight banks it had tested would have to strengthen their capital positions as a result of the exercise.
It said the results demonstrated that “the major UK banks have capacity to support households and businesses through a stress that is substantially more severe than the current outlook”.
The lenders – Barclays, Lloyds Banking Group, HSBC, NatWest, Santander UK, Standard Chartered, Nationwide Building Society and Virgin Money, which together account for about three-quarters of lending in the UK – were assessed to see how they would cope with a financial meltdown.
Even at the worst points of the test, the banks’ aggregate capital ratios were “more than twice the level before the 2007-08 global financial crisis”, the BoE said.
