UK banks 'should pass EU stress tests'

11 July 2011

Banks in the UK should be able to pass the stress tests from the European Banking Authority (EBA) that will assess whether or not the lenders would be able to survive another financial crisis.

This is the opinion of sources from the Treasury, while it is expected that some institutions across Europe might fail the programme, This is Money reports.

Banks are to be tested on a number of risks, including possible debt defaults by countries such as Greece, as well as a house price drop of 18 per cent.

They will be expected to demonstrate that they have the core capital reserves in place that amount to at least five per cent of their total assets should they make considerable losses on bad loans.

Banks that fail the assessments will be given three months to develop an improvement strategy.

The EBA came into being on January 1st this year and has taken over responsibilities from the Committee of European Banking Supervisors.

By Claire Archer

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development