System-wide exploratory scenario objectives and participating firms
The Bank publicly launched its system-wide exploratory scenario (SWES) in June 2023. The SWES aims to improve our understanding of the behaviours of banks and non-bank financial institutions during stressed financial market conditions and how those behaviours might interact to amplify shocks in UK financial markets that are core to UK financial stability.
There are just over 50 participants in the SWES – including banks, insurers, central counterparties, funds managed by asset managers, hedge funds, and pension funds. We are working closely with the Financial Conduct Authority, The Pensions Regulator, and other domestic and international regulators on the SWES.
On 10 November 2023 the Bank launched Round 1 of the scenario phase of the SWES. During the scenario phase, we are asking SWES participants to consider the impact of a hypothetical stress scenario, tell us how it would impact their business, and the actions they would take in response. We aim to use participants’ submissions to understand how their actions and behaviours during a stress could affect wider UK financial stability, particularly the resilience of the core UK SWES markets of focus.
The stress scenario phase of the SWES comprises two rounds, enabling us to account for system-wide interactions and amplification effects. More detail on each phase of the SWES can be found in the Launch of the scenario phase of the SWES page.
As part of the launch of Round 1, SWES participants have been sent a package of documents consisting of (among others) details on the hypothetical scenario, response templates, and guidance for filling these templates in. More detail can be found on the Launch of the scenario phase of the SWES page.
Currently the Bank intends to launch Round 2 of the scenario phase in 2024 Q2 and expects the SWES to conclude in 2024 Q4.
Results and publications
The Bank expects to publish a Bank report on the SWES results in late 2024 once the exercise has concluded, and to share interim results through standard Bank/Financial Policy Committee communication channels such as Financial Stability Reports. Published materials will not provide information on individual firms or any commercially sensitive information.