UK banks can withstand fresh crisis, key test finds

UK banks are strong enough to withstand a fresh economic crisis, according to the Bank of England.

In its stress test of the financial system, the Bank said the UK's eight largest lenders could survive a worst case scenario of plunging house prices, a deep recession and soaring inflation.But some households and firms "may struggle with repayments" on loans. The Bank has raised interest rates from 0.1% in December 2021 to 5% in an effort to bring down inflation. But it has lifted households' costs, including higher monthly mortgage payments.

Despite customers being under more pressure, lenders are "resilient and are strong enough to support their customers",The report also showed the result of a "stress test" on UK banks and building societies to see if they could withstand catastrophic economic conditions including house prices falling by 31%, the unemployment rate increasing to 8.5% and inflation rising to 17%.

The banks and building societies that have been tested include: Barclays, Lloyds, HSBC, NatWest, Santander UK, Standard Chartered, Nationwide Building Society and Virgin Money.

Source: Loan Digest (loandigest.net)

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