BoE runs ‘reverse stress test’ to prepare for renewed Covid crisis

Andrew Bailey
Andrew Bailey

The Bank of England has run a “reverse stress test” that it hopes will help it prepare for possible further rounds of financial instability due to Covid-19.

Instead of imposing a fixed shock on bank balance sheets and modelling the response of capital ratios, the BoE’s financial policy committee took the results of the 2019 test as a given and asked what sort of Covid-related stress might cause such a major drop in capital. It found that two scenarios could do so, each of them raising UK

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