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UK banks pass stress test

28 Oct 2014

A ‘health check’ for banks, carried out by the European Banking Authority (EBA), has shown that all UK banks would be able to survive should there be another financial crisis.

Despite this news, shares in all British banks fell. Shares in Lloyds Banking Group, which narrowly passed, dropped 2.4%. In total 123 EU banks were subjected to the stress test, with 24 failing.

Having recently announced the planned closure of 200 branches, Lloyds released a statement about their stress test results, saying; ‘Our strong position reflects the steps taken by the group’s management over the last three years to return its balance sheet to a robust position, and we will continue to use this strong basis to help Britain prosper’.

One notable failure was Italian bank Monte dei Paschi, whose shares fell 17% on Monday after performing worst out of all those tested. Some Austrian and German banks saw their shares rise as much as 5% upon successfully passing.

A similar study carried out by the European Central Bank (ECB), analysed 130 Eurozone banks and reported that 25 failed their stress test, with 12 already having taken action to improve their outlook. No UK banks were included in the ECB study.

ECB Vice President, Vitor Constancio, said: ‘This review of the largest banks’ positions will boost public confidence in the banking sector. It will help repair balance sheets and make the banks more resilient and robust’.