Britain’s biggest banks are allegedly pushing the Bank of England (BOE) to scrap the next series of stress tests amid the rapidly developing challenge of the coronavirus pandemic.
Stress tests are when the BOE looks at individual banks and calculates if they have enough of a special buffer zone of money to weather a downturn in the economy or any crises. Under a mandatory international accounting rule, known as IFRS 9, it also forces them to book bad loans earlier than in previous crises.
Anonymous senior banking sources told Reuters this weekend that banks are telling the central bank to focus on the real test of managing a crisis and not theoretically stress testing them because the economy is going through a crisis right now.
"It would be stupid to run a stress test during a stress. Let's concentrate on this situation rather than a hypothetical one,” said one source to Reuters. "Don't force banks to do things that are unhelpful ... How do you avoid that double whammy?”
The results of the last set of stress tests was in December 2019. Outgoing BOE governor Mark Carney confirmed at the time that the UK’s banking system could survive a worst-case-scenario economic shock but warned of a possible “further deterioration” in the global economy. The next set of test scenarios are due in late March this year.
Over 140,000 people across the world have contracted coronavirus and there have been 5,443 deaths. Out of those, more than 22,000 cases of coronavirus have been confirmed in Europe. Out of those, more than 1,200 who contracted the virus have died.
In the UK, 37,746 people have been tested for coronavirus and the total number of confirmed cases has reached 1,140. As of 14 March, there have been 21 deaths.
On 15 March, the UK health secretary confirmed that the over-70s could be asked to self-isolate in 'coming weeks' to 'shield' themselves from coronavirus.
Meanwhile, multiple economists and analysts have said the impact from the coronavirus on global economies will be “unavoidable.”