The BOE's Financial Policy Committee “reviewed a disorderly Brexit scenario, with no deal and no transition period, that leads to a severe economic shock,” the regulator said on Wednesday. The banking system is “strong enough to continue to serve U.K. households and businesses” even in a no-deal divorce, it said.

In addition to their capital strength, banks also have the liquidity needed to survive a major market disruption, the FPC said. At group level, they have more than 1 trillion pounds (US$1.3 trillion) of high-quality liquid assets, and could withstand more than three months of stress in wholesale funding markets.

In addition to Barclays and Lloyds, the other lenders covered by the test are HSBC Holdings Plc, Nationwide Building Society, Royal Bank of Scotland Group Plc, Santander UK Group Holdings Plc, and Standard Chartered Plc.

This year's stress test held banks to a new accounting standard that will force them to make provisions for potential losses right after making a loan. But the BOE used a transitional form of the rules, known as IFRS 9, softening the blow to their results.

In its Financial Stability Report, the FPC also:

• Maintained the U.K. counter-cyclical capital buffer requirement at 1 percent of risk-weighted assets;
• Kept up pressure on the EU to take action to prevent market turmoil in a disorderly Brexit; and
• Found that U.K. banks' holdings of securitizations of leveraged loans are “very small.”

From: Bloomberg

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