Overview
Since 2014 the Bank has undertaken regular concurrent stress testing of the UK banking system to support the FPC and PRA in meeting their objectives. A concurrent bank stress test is an exercise where multiple banks’ balance sheets are subjected simultaneously to a common adverse scenario. Such tests allow us to assess individual banks’ and the banking system’s resilience to a range of adverse shocks and their ability to continue to support households and businesses if a stress does materialise.
The Bank of England’s approach to stress testing the UK banking system
In 2024 the Bank published its updated approach to stress testing the UK banking system.
In summary:
- The Bank expects to carry out a Bank Capital Stress Test every other year. This will be a test of risks related to the financial cycle in which the largest or most systemic UK banks participate. This can be seen as the successor to the Annual Cyclical Scenario exercises under the previous approach.
- In intervening years, the Bank expects to use stress testing when appropriate to supplement its assessment of the resilience of the banking system, but in a way that is less burdensome for banks – for example, through desk-based stress tests. These may be similar to the desk-based stress tests that have taken place in recent years, such as in 2024.
- The Bank will continue to use exploratory exercises as a means of assessing other risks, including structural and emerging risks that are not closely linked to the financial cycle. These can be seen as the successor to the Biennial Exploratory Scenarios under the previous approach.
Read the new approach, published 29 November 2024:
The Bank of England’s approach to stress testing the UK banking system