The Bank of England’s 2021 ‘solvency stress test’ (SST) shows the major UK banks are resilient to a severe path for the economy in 2021–25 on top of the economic shock associated with the Covid-19 (Covid) pandemic that occurred in 2020.

These results support the Financial Policy Committee’s (FPC) judgement that the system is resilient to outcomes for the economy that are much more severe than the Monetary Policy Committee’s (MPC’s) central forecast.

The major UK banks’ resilience in the test reflects a strong end-2020 starting point, with an aggregate Common Equity Tier 1 (CET1) capital ratio of 15.9%, and Tier 1 leverage ratio of 5.7% (excluding the software asset benefit that is due to
expire at the start of 2022).

Those banks’ aggregate CET1 capital ratio falls by 5.5 percentage points in the stress to a low point of 10.5%, which compares favourably with a 7.6% ‘reference rate’, itself comprising banks’ minimum requirements and systemic buffers, adjusted to account for the impact of International Financial Reporting Standard 9 (IFRS 9).

The aggregate Tier 1 leverage ratio low point of 4.8% is also above the reference rate of 3.7%. All eight participating banks remain above their reference rates for both CET1 capital and Tier 1 leverage ratios.

The Bank of England intends to revert to the Annual Cyclical Scenario (ACS) stress-testing framework for 2022. Due to its broader and countercyclical nature, the ACS framework is well suited to informing the setting of capital buffers, including the UK countercyclical capital buffer.


The bank of England Stress Test framework and results documents can be found here: