London: All Britain’s main banks would be able to withstand a sharp fall in house prices, other than the troubled Cooperative Bank, the Bank of England said on Tuesday.
State-backed RBS and Lloyds only scraped through the BoE’s first sector-wide test of the health of major lenders after both took pre-emptive measures to shore up their capital defences before the BoE reached its conclusions.
Both banks will need to seek permission from the BoE’s regulatory arm before paying any dividends.
Britain pumped 66 billion pounds into Royal Bank of Scotland
and Lloyds Banking Group to keep them afloat during the financial crisis of 2007 to 2009, prompting a shake-up in the way banks are supervised.
The BoE’s Financial Policy Committee, which is tasked with dealing with potential risks to the economy from the banking system, recommended that banks be tested regularly to check they have sufficient capital to withstand market shocks.
The FPC said Tuesday’s tests showed that Britain’s banking system was much safer than just a couple of years ago, and that no new sector-wide protective measures were needed.
“The results show that the core of the banking system is significantly more resilient (and) that it has the strength to continue to serve the real economy even in a severe stress,” BoE Governor Mark Carney said.
The FPC said it would set additional bank risk buffers which take account of the dangers posed by credit booms at zero for now, but urged banks to improve governance to tackle recent misconduct and operational failures.
A feared increase in risks from Britain’s housing market — which the BoE said in June was the biggest threat — has so far not occurred, though household debt remained high.
The BoE stress test adds a number of additional layers on top of those applied by European regulators in an EU-wide test of 123 banks in October.
