Currencies

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Categorized | Banks

BoE stress tests: all you need to know


Posted on November 30, 2016

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning.

Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession of 1.9 per cent of GDP and a more than 30 per cent fall in UK house prices over five years.

Here are the key takeaways:

  • RBS is the biggest loser: the state-controlled bank emerged bottom of the pile, suffering the second-highest ever percentage fall in capital under the stressed scenario after the Co-operative Bank in 2014
  • Capital plans: RBS’s failure means it has now presented regulators with a plan to cut costs and sell-off some of its assets to address its capital shortfalls. Responding to the results, RBS said it would take an “array of capital management actions” which would amount to at least £2bn
  • Better than previous years: This year’s stress tests were the toughest ever conducted by the BoE and overall, lenders emerged with stronger balance sheets and higher overall capital levels to withstand major economic shocks.
  • Barclays and StanChart: These were the two other big lenders who failed to meet some of the BoE’s minimum hurdles, but, unlike RBS, were judged to have had sufficient capital-lifting plans in place
  • Financial stability: releasing its latest outlook on financial stability, the BoE warned of “existing vulnerabilities” in the financial system, which have been compounded by the US election and Britain’s vote to leave the EU.
  • Carney praise: Speaking on Wednesday, governor of the BoE Mark Carney praised banks for their “greater balance sheet resilience” and said the domestic banking system was well placed to keep providing households with credit in times of economic stress
  • Brexit warning: Mr Carney also praised the results in light of the UK’s Brexit vote. This resilience “may prove valuable” in light of the prospect of a “UK specific risk to financial stability” materialising, said the governor
  • Italian banks: ahead of a key referendum in Italy next Sunday, the BoE flagged the challenges faced by the country’s banks, which have suffered questions over their attempts to raise private capital and could be forced to impose losses on creditors