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Bank of England stress tests: what are the banks being tested on?
Banks are being tested on their resilience to a catastophic series of events last seen at the end of the first world war. To test the resilience of the financial sector, the Bank of England created a hypothetical scenario in which economic growth plunges, the housing market crashes, and inflation and unemployment soar. On top of the slump that came in the wake of the banking crisis, the UK economy is seen as contracting by 3.5% in late 2015. Such a severe downturn has “happened only in a single episode over the past 150 years – and that was in the immediate aftermath of the first world war,” the Bank said. The ... (full story)