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Co-op Fails Bank of England Stress Test

Tuesday, December 16, 2014

The Co-operative Bank has failed a "stress test" conducted by the Bank of England. A total of 8 banks were subjected to the test which was designed to assess their ability to withstand another economic crisis.

Five major banks passed the test, while Lloyds Banking Group and Royal Bank of Scotland were found to be at risk in the event of a severe downturn.

However, the governor of the Bank of England, Mark Carney, warned that "this was a demanding test" and the banking system was "significantly more resilient" than in 2008.

The "stress test" was intended to replicate an economic doomsday scenario and each of the banks were tested under the following conditions:

  • Sterling falls by 30%
  • House prices fall by 35%
  • Bank rate rises to 4.2%
  • Inflation rises to 6.6%
  • Unemployment rises to 12%
  • GDP falls by 3.5%
  • Share prices fall by 30%

The full results of the test are available on the Bank of England website.