BoE outlines 2018 stress test

The BoE has published the scenario against which it will stress-test banks in 2018. As confirmed by the FPC, the basis of the test will be the same as the 2017 version, but the hurdles will evolve such that:

• banks will be held to higher standards the more systemically important they are;
• hurdle rates will incorporate buffers to capture both domestic and global systemic importance;
• the minimum capital requirements incorporated in the hurdle rates will be calculated in a way that more accurately reflects how they would evolve in real stress; and
• there will be adjustments in line with the new IFRS 9 standards.

BoE has provided guidance for participating banks and building societies.