Bank of England unveils new bank stress test scenario

LONDON: The Bank of England set out the economic downturn scenario against which major British lenders’ financial health will be tested as part of its annual bank “stress tests”.

The scenario - which is closer to a worst-case situation than how the BoE expects the outlook to develop - includes the BoE’s Bank Rate rising to 6% early next year and a 5% fall in British economic output, as well as a 31% slump in house prices.

Bank of England raises rates to 2.25%, despite likely recession

The BoE will publish the results of the stress test in mid 2023, which could lead to it recommending that banks hold more capital.