Overview
The PRA published two stress test scenarios on 17 April 2025 for use by banks and building societies that are not participants in the Bank of England’s concurrent stress testing exercise. These scenarios have been derived from the 2025 Bank Capital Stress Test scenario which was published on 24 March 2025 to support concurrent stress testing of the largest UK banks and building societies. The scenarios serve as a template and severity benchmark for firms to support their own internal capital adequacy assessment process (ICAAP) stress testing scenario design processes and can be found below:
ICAAP scenario variable pathsBy publishing two differing scenarios, our aim is to encourage firms to consider the type, characteristics and severity of stress that their business model is vulnerable to, when designing their own stress testing scenario (or scenarios).
The stresses applied under the scenarios are not a forecast of macroeconomic and financial conditions in the UK, or a set of events that are expected, or likely, to materialise. Rather, as per previous scenarios, they are coherent ‘tail risk’ scenarios designed to be severe and broad enough to assess the resilience of UK banks to a range of adverse shocks.
The results of stress tests are an important consideration for the PRA in setting capital requirements for banks and building societies.
Guidance on the role of stress testing within the framework for setting banks’ and building societies’ capital requirements can be found in our Supervisory Statement on the ICAAP and the supervisory review and evaluation process (SREP).
How our scenarios should be used
Firms should consider the stress test scenarios in the context of their business and its own specific risk drivers. Our scenarios should be used as a starting point for firms to build and accurately calibrate their own scenarios under Pillar 2. We recognise that any single scenario, designed for firms with very different business models and risks, has its limits. We expect firms to choose scenarios that provide a strong challenge for their business.
Firms are ultimately responsible for developing their own scenarios to test their firm’s resilience.
Exploratory exercises
As part of the previous approach to stress-testing the UK banking system, in 2017, 2019 and 2021 the Bank undertook a type of concurrent stress test known as the ‘biennial exploratory scenario’ (BES). The focus changed from exercise to exercise and was designed to explore risks not covered by the annual cyclical scenario exercise.
The 2017 exercise explored risks from persistently low interest rates and the results were published here: Stress testing the UK banking system: 2017 results
The 2019 exercise focused on liquidity risks and some of the key were published in the Financial Policy Summary and Record - March 2021.