On October 21, 2015, the Bank of England published its approach to stress testing and evaluating the resilience of the UK banking system and set out its plans in this regard for the next three years. The BoE’s approach will include the introduction of an annual cyclical scenario, assessing risks to the banking system that derive from financial cycles, taking into account domestic, global and markets elements. This annual cyclical scenario will include all PRA-regulated banks and building societies with total retail deposits greater than £50 billion, on an individual or consolidated basis, at a firm’s financial year-end date. Currently, this means the following firms will be included: Barclays plc, HSBC Holdings Group, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland Group, Santander UK plc and Standard Chartered Bank Group. UK subsidiaries of foreign-owned investment banks will be excluded. Every other year, the BoE will also biannually explore scenarios that are unrelated to the financial cycle and for which risks to financial stability and individual banks are deemed to be emerging. Therefore, in 2016, there will be a EBA stress test and a UK cyclical scenario test. In 2017, there will be both a UK cyclical and exploratory scenario test (for the first time). In 2018, the BoE intends to only run a UK cyclical scenario test. The results of the 2015 UK stress test are expected to be published on December 1, 2015.
The BoE’s approach to stress testing is available at: http://www.bankofengland.co.uk/financialstability/Documents/stresstesting/2015/approach.pdf.