And BOE follows with details of UK stress test
Shortly after EBA, the BOE published its own stress test definition.
From the announcement: “A key threshold for the UK variant test will be set at 4.5% of Risk Weighted Assets (RWAs), to be met with Common Equity Tier 1 (CET1) capital in the stress – using a CRD IV end-point definition of CET1 in line with the UK implementation of CRD IV. If a firm’s capital ratio is projected to fall below the 4.5% CET1 ratio in the stress, there is a strong presumption that the PRA will require the firm to take action to strengthen its capital position.
However, depending on the outcomes for specific firms the PRA may still require action to strengthen capital positions even if the threshold is met.
To determine whether action is needed, the PRA will examine factors such as the firm’s leverage ratio, its Tier 1 and total capital ratios on a risk-adjusted basis, the adequacy of its recovery and resolution plans and the extent to which potentially significant risks are not quantified adequately or fully as part of the stress.
See the announcement of BOE.
and the dedicated BOE stress test page: here.