Standard Chartered and RBS (Royal Bank of Scotland) were the weakest of Britain’s 7 major banks in a Bank of England (BOE) stress test. For the second year, the BOE has tested the UK’s largest lenders in order to evaluate and ascertain whether they would survive a financial blip.
In this instance, it was assumed that oil had fallen to $38 a barrel and that the global economy had slumped.
Out of the 7 banks tested, RBS and Standard Chartered were found not to have insufficient capital strength.
All banks were advised that they would need to set aside capital as part of a new measure being phased in called a “countercyclical capital buffer”.
The extra cash should allow banks to absorb losses from bad loans and other problems in times of economic decline.
It will mean the banks have to allocate more money to protect against lending losses in the UK, but some of this will be brought in from other reserves that the banks already possess.
Source: BBC Business News