Mar 28, 2017 11:15 AM EDT
The Bank of England has prepared new stress test scenarios to be given to the biggest banks in the UK to prepare for any sudden slowdown in foreign interests in UK assets. The Brexit vote last year has triggered a sharp drop in the value of the pound.
Seven major banks that will take part of the stress tests are Barclays, HSBC, Lloyds, RBS, Santander UK, Standard Chartered and Nationwide. The banks will have to prove and show that they have sufficient resources to cope up with any shocks in the future. This comes after the value of the pound dropped due to UK leaving the EU.
"As highlighted in recent financial stability reports, the United Kingdom's large current account deficit creates a vulnerability to a reduction in foreign investor appetite for UK assets and increases in funding costs for real-economy borrowers," the Bank of England said in a statement. The stress test would determine which banks will have higher interest rates on government bonds with an associated fall in sterling. UK banks will also have to show that they can cope with recession both globally and in the UK.
This means that banks should show high-interest rates at four percent with house prices falling by a third. Currently, the Bank of England's key interest rates stands at 0.25 percent. Analysts, on the other hand, said the UK stress test is similar to that set forth in 2016 but the global stress test looks tougher. Results of the stress test will be released between October and December.
UK banks have to remain a benchmark capital levels and if they fall below that level under the stress test scenario then they will be required to take action. This would mean raising capital or stopping dividend or bonus payments. Notably, RBS failed the test last year within which it had to submit a new capital plan. Barclay and Standard Chartered only passed the test after taking strategic management actions.
The Bank of England also plans on making UK banks go under a second test called the explanatory scenario. The test is not focused on the adequacy of bank capital but rather about the banks' business models and sustainability.
Currently, a driver of a UK-registered car is allowed to drive anywhere in the EU, the EEA (European Economic Area), Switzerland and Serbia, and not have to carry a green card that proves you have insurance cover.
President Trump on Friday announced the first concrete deal with China to come out of nearly three months of trade talks - a deal to prevent currency manipulation.
Europe's largest economy offered mixed signals on Friday that suggest it's down but not out.
New research finds that despite regulations, CEOs control information release and may do so for their own financial gain
Normally, it's good to believe in yourself. But research from Indiana University's Kelley School of Business indicates that it can be bad advice for amateurs investing online in unregulated, sometimes risky, equity crowdfunded ventures.
Nearly half of new moms and a quarter of new dads leave their full-time STEM jobs after they have their first child, according to a new study.
Visa Inc and Mastercard Inc, the two biggest U.S. card networks, are preparing to raise certain fees levied on U.S. merchants for processing transactions from this April, the Wall Street Journal reported on Friday, citing people familiar with the matter.
People who travel for business two weeks or more a month report more symptoms of anxiety and depression and are more likely to smoke, be sedentary and report trouble sleeping than those who travel one to six nights a month, according to a latest study conducted by researchers at Columbia University's Mailman School of Public Health and City University of New York.
President Trump said Friday he is declaring a national emergency on the southern border, tapping into executive powers in a bid to divert billions toward construction of a wall even as he plans to sign a funding package that includes just $1.4 billion for border security.