BoE adjusts stress-testing framework
Tests this year will be based on 2020’s reverse stress test
The Bank of England is adjusting how it conducts its stress-testing this year, as it looks to “update and refine” the results of its more limited stress-testing exercises in 2020.
In 2020, due to the Covid-19 pandemic, the BoE cancelled its standard tests. It opted instead for a ‘reverse stress test’, which sought to estimate how large a shock would be needed to generate a five percentage point drop in banks’ regulatory capital buffers. This year, the stress scenario is being calibrated based
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