PwC comments on Bank of England stress tests results
Published at 07:45 AM on 30 November 2016
Commenting on the Bank of England's stress tests results today,
James Hewer, UK stress tests leader and partner at PwC said:
"Today's stress test results demonstrate that the UK banking system remains resilient to a severe economic shock. This year's test was the toughest yet, with a more severe scenario and a higher pass mark than in previous years. The fact that no banks were required to make further changes to their capital plans - despite some dipping below one or more of the threshold indicators - is testament to their ongoing efforts to re-shape their businesses to meet post-crisis regulatory demands."
"There is no room for complacency, however, with the Bank of England continuing to raise the expectations bar."
Isabelle Jenkins , UK head of banking and capital markets at PwC, said:
"The development and independent validation of stress testing models and the process by which modelled outputs and judgements are reviewed and challenged are all highlighted as areas where the banks need to improve their stress testing capabilities next year. Those models will also need to be adjusted over time to incorporate IFRS9 accounting changes that will impact the timing of when losses are recognised.
"Confirmation that next year's additional 'exploratory' scenario will be no more severe than the annual cyclical scenario and will involve a less data intensive process will be welcomed by the banks. Nonetheless, the operational challenge of running an additional scenario over a longer time horizon to the same timetable as this year's test should not be underestimated."
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