(2 November 2018 – United Kingdom) Barclays and Lloyds Bank were among the worst performers in the European Banking Authority’s stress test, with a key capital measure dropping close to what investors consider the bare minimum needed to withstand a hypothetical economic crash.
Despite the poor performance, the results found that the region’s top 48 banks had enough capital to withstand the worst-case Brexit scenarios.
“In a surprise set of results, UK banks have fared worse than their European counterparts as IFRS9, combined with high levels of unsecured debt, took its toll on capital,” a banking partner at KPMG UK said.
“However, you have to consider that the UK was tested against a far more severe scenario than most other countries. In spite of the heavy losses, UK banks still withstood the incredibly tough test,” the KPMG partner continued.
The test is a snapshot of balance sheets at the end of 2017 and therefore does not take into account any actions taken by the banks since then to shore up their capital.