Banks face investigation as credit card debt soars

Mark Carney

Banks face investigation as credit card debt soars

All banks will have to have the resources in place to cope with any shocks.

The Bank of England's 2017 stress test will include an additional scenario which incorporates a "severe and synchronised United Kingdom and global macroeconomic and financial market stress", as well as an independent stress of misconduct costs.

The Bank of England (BOE) will test the risks associated with sterling dropping by a further 32 percent from today's level to languish at a low of 85 cents by year-end.

Alongside the nightmare scenario of the Brexit collapse in the pound, Threadneedle Street is also asking banks to test against a longer-term scenario of lower profits over seven years.

The Bank of England says that lenders will have to provide copies of contingency plans to reassure regulators that they are ready for "a range of possible outcomes".

The other end would see rates rising towards 4%, with house price values plunging by a third amid a global economic meltdown.

The annual stress test will examine the resilience of seven UK lending giants, including Barclays, HSBC, Lloyds Banking Group, Nationwide, Royal Bank of Scotland Group (RBS), Santander UK and Standard Chartered.

This year's additional test involves scenarios outside the usual financial cycle, including weak global growth and trade, lower cross-border banking activity and persisting low interest rates, according to the statement. "The FPC judges that these standards should be monitored closely", read the BOE's press release.

The bank noted subdued global growth, persistent uncertainty over worldwide trade policies across the developed world, the United Kingdom's high private debt and uncertainty surrounding the final UK-EU post-Brexit trade deal as the risks facing the country's financial system.

The Bank also said it saw the possibility of firms using more complex business structures after Brexit which could "reduce the resilience" of British financial services.

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