Stress tests assess commercial banks’ ability not just to withstand severe shocks, but also to maintain the supply of credit to the real economy under severe stress. The Bank of England conducts annual stress tests to check the resilience of the banking system. If and when a bank is found to have insufficient capital, then it must take steps to increase their capital reserves. Stress tests have become an important part of the policy designed to maintain general financial stability in the aftermath of the 2007-08 Global Financial Crisis.
2018 Stress Test
In the 2018 stress-test scenario:
The 2018 stress tests found that all UK commercial banks had sufficient capital to be able to withstand this barrage of (negative) external shocks.
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