BOE Stress Test 2025: Have BCS, HSBC & Others Proved Resilience?

According to the Bank of England’s 2025 Stress Test results, the country’s biggest lenders are well-equipped to withstand a severe economic downturn. In one of the toughest hypothetical scenarios ever applied by the regulator, all seven British banks that were tested — Barclays PLC BCS, HSBC Holdings plc HSBC, Lloyds Banking Group plc LYG, NatWest Group plc NWG, Standard Chartered, Santander UK and Nationwide Building Society — have cleared their capital hurdles with comfortable margins.

Thus, at a time when global financial conditions remain volatile and macroeconomic uncertainty continues to test the strength of banking sectors worldwide, such results offer a comprehensive snapshot of system-wide resilience.

What Was the Test Scenario Used in 2025?

This year’s scenario modelled a global aggregate supply shock, simulating a deep recession combined with persistent inflationary pressure.

Under the hypothetical downturn, U.K. GDP was assumed to fall 5%, unemployment to rise sharply to 8.5% and global trade volumes to contract by 20%.

Moreover, inflation was projected to grow to 10%, prompting a steep rise in the Bank Rate to 8%. Meanwhile, U.K. residential property prices were stressed to fall almost 30%, alongside sharp declines in equity markets, widening credit spreads and severe liquidity stress across the global financial markets.

How Did Banks Fare Under the Stress Test?

The system-wide outcome showed that while the aggregate capital buffers dropped from 14.5% to 11%, they still remained well above the regulatory minima and systemic buffer requirements.

Barclays, Lloyds, HSBC and NatWest exhibited particularly strong buffers, reflecting solid profitability and diversified income streams. For Barclays, its CET1 ratio fell in stress but remained at least 9.3%, comfortably above the minimum requirement of 7.2%. Its leverage ratio remained above the 3.25% floor.

Standard Chartered and Santander UK also met both CET1 and leverage requirements with healthy margins. Nationwide Building Society showed consistent strength, even under stressed mortgage-market conditions.

Thus, no individual major bank was needed to raise capital or was forced to take remedial actions.

Following the stress-test results, the Bank of England’s oversight committee revised down the benchmark Tier-1 capital requirement for U.K. banks from 14% to around 13% of risk-weighted assets, recognizing the sector’s improved resilience and enabling greater lending capacity as economic conditions evolve.

Currently, HSBC and NWG carry a Zacks Rank #2 (Buy), whereas BCS and LYG have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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