Bank of England expected to simulate US recession in next stress test
The Bank of England is now believed to be planning to subject UK banks to a fictional US recession, to see whether they could cope in a real life scenario.
It comes after lenders were tested to see if they could withstand a downturn in emerging markets, including the Chinese economy, and, in a previous round of tests, the UK housing market.
"I think going forward there will be a need to be a stress probably of the US exposures," David Belsham, an external board member of the BoE's Prudential Regulation Authority told the Sunday Telegraph.
"For a lot of the UK-based firms, the stress that was applied to them was very close to the biting-stress and the follow-up stress that is being done this year.
"Capturing risks arising in the far East and in Europe helps to pick up the biting scenario for other firms."