Three UK banks among worst performers in EU stress test

Four UK banks - Barclays, HSBC Holdings, Lloyds Banking Group and The Royal Bank of Scotland Group - participated in the test, which analysed their resilience against severe economic scenarios such as an economic slump of more than 8%.

Under the worst scenario, Barclays and Lloyds had some of the largest falls in their capital ratios, but all banks preserved a common tier ratio above the 5.5% threshold.

The two banks, alongside RBS Group, also had some of the largest deteriorations in CET1 capital.

The Bank of England stressed that all four UK banks "would be resilient to a severe economic and market stress" and noted that the UK was subjected to more severe economic scenarios than other European economies in the test.

Additionally, the test was based on 2017 balance sheets and does not account for any actions taken by the banks since then to boost liquidity ahead of the Brexit deadline.

Last month, RBS announced that it has set aside £100m to deal with a ‘more uncertain economic outlook’ as the UK prepares to leave the EU - the first major UK bank to make such a provision linked to Brexit.

In a recent speech, Sam Woods, deputy governor of the Bank of England and chief of the PRA, said banks should boost liquidity before the Brexit deadline in March "just in case things go badly".

Woods said the Bank of England has been working with firms "to ensure they have in place liquidity sufficient to accommodate a severe dislocation in financial markets".

The results of the 2018 Bank of England stress test will be published on Wednesday the 5th December.