A little more information on the BOE stress tests which consider the impact of an Asian slowdown (a decline in growth in China to 1.7%) upon UK banks. The bottom line is that none of the large seven UK banks are required to raise capital through RBS and StanChart were under a pressure relative to other UK lenders. StanChart's CT1 ratio dropped to 5.4% under the most challenging stress test, below the 6% target minimum, however the bank's recent $2 billion issuance of capital may have helped here. RBSs CT1 falls to 6.1% under this scenario, close to the target under the stress. While the sector has been issuing additional AT1 capital, such instruments do not kick in under this scenario however. Interesting, the stress tests also demonstrated a further £40 billion of misconduct charges could be absorbed by the sector, on top of the £ 30 billion of charges already levied, according to the IFR (December 5th, 2015). This exercise is all part of a regular cycle of stress tests implemented by the BOE.
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