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Uk Banks Stress Tests To Get Tougher...

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Unable to post full details of link because this comes from the FT, but google "Borrowers revive mortgage debt risk" if you want to read the full article.

The article tells us that the FSA, with its own stress tests, are telling UK banks to be prepared for the worst, and this years "adverse scenario" includes a 20.7% fall in residential property values.


FSA says UK bank tests will be tougher than EU's

Turner expects capital surcharge deal for biggest banks

* UK banks' exposure to Japan seen 136 bln pounds

By Huw Jones

LONDON, March 17 (Reuters) - A pan-EU health check of banks currently underway will be useful and more consistent than last year's flawed exercise but Britain's own stress-test is tougher, Financial Services Authority Chairman Adair Turner said on Thursday.

"I suspect you will find that our parameters will be tougher and tighter than the European ones. They were last year," Turner told reporters during a briefing on the watchdog's prudential risk outlook report. [iD:nLDE72G0GH]

The European Banking Authority is due to publish on Friday the economic shock scenario that some 88 banks across the European Union will have to test to see if they end up with enough minimum capital.

"We think the European stress test will be a useful exercise," Turner said. This will be because of a greater "commonality" and less variablity among countries than last year.

The results of the EU test will be published in June but the UK won't publish the results of its own stress test.

Turner said that since November 2008, all UK banks have passed the FSA's rolling programme of stress tests.


Turner said the biggest banks will face a capital surcharge above the new Basel III global bank capital requirements that come into effect from 2013.

"My own belief at the moment is we will end up with a global agreement for some level of surcharges. The debate is fundamentally about how much rather than whether or not there will be some," Turner said. "There is a significant global support for an element of equity. The argument that equity is the best form of it has significant support around the world,"

The debate now centres on what sort of "exchange rate" there could be so that a surcharge made up of pure equity would equal a larger amount in less a pure form of capital such as contingent capital or CoCos, Turner said.

"Those are the debates going on," Turner said.

The FSA is also trying to work out what impact Japan's disaster will have on Britain's financial sector.

Hmmm, I wonder why the UK will not be publishing the results of their own stress test? :rolleyes:

"Wake Up to Money" on Radio 5 this morning were discussing stress tests, They said banks will need to factor in a much bigger decline in Real Estate, there are worries about mortgage exposure.

Link http://www.bbc.co.uk/programmes/b0070lr5

Starts about 20 mins in.

I am feeling much more bearish about property recently.

Results from recent auctions and cheaper property in my own areas are now showing big falls.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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