LONDON May 19 Banks in Britain broadly support
Bank of England plans for yearly checks on their capital levels,
although they disagree on how detailed the published results
Eight of Britain's biggest banks, including Barclays
, RBS, Lloyds and HSBC, will
undergo a health check this year to see if they hold enough
capital to withstand a 35 percent slump in house prices and a
spike in interest rates to 4 percent.
This year's exercise begins what will become an annual test.
It will be expanded to include other banks, to see if they can
withstand market shocks without taxpayer money.
The BoE published on Monday a summary of the results of a
consultation last year on how the stress test could be developed
in the medium term. Responses to that consultation led the
central bank to tweak this year's test.
"There was broad support for including major UK banks and
significant UK subsidiaries of global systemically important
banks in the framework," the BoE said.
There was also support for including medium-sized banks, if
their test is less comprehensive, and for testing clearing
houses, whose role is set to become more important.
Clearing houses are third parties who guarantee trades such
as financial derivatives. Regulators want more of the market to
be cleared, to increase transparency and safety.
The Bank said that among the 23 responses, views differed
over how detailed the published results should be.
"Some felt that bank specific results should not be
disclosed under any circumstances, while others saw this as
essential for the credibility of the framework," the summary
The BoE had proposed that the banks not only face a common
test but also have their own "bespoke" test bolted on. That test
will focus on particular parts of the bank, such as exposures to
This bespoke test would be expected to result in higher
losses, a principle questioned by many respondents, who said it
amounted to banks pre-judging the outcome of the test. A bespoke
element was not included in this year's test, contrary to some
The Bank said the responses led it to increase international
coordination of bank health checks by aligning this year's test
more closely with a pan-European Union health check of top
lenders, four of which are from Britain.
It has also given greater clarity on this year's thresholds
for passing the test as respondents wanted. The central bank
will publish another paper setting out how it will develop the
stress test of lenders beyond this year.
(Reporting by Huw Jones; Editing by larry King)