Stress fracture

2 Nov 2018 By Christopher Thompson

The EBA’s adverse scenario hits Barclays and Lloyds worse than other euro zone lenders. A projected UK economic hit deeper than euro zone peers helps explain why. EU stress tests are always political, and this one can be read as a coded warning against a messy UK exit.

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UK banks Barclays and Lloyds Banking Group and Italy's Banco BPM fared worst in the latest European Union wide "stress test" of top lenders' resilience to simulated market shocks.

The European Banking Authority (EBA), the EU's banking watchdog, published the results for 48 banks on Nov. 2.

Analysts have said that banks failing to complete the "adverse" or toughest part of the test without preserving a core Tier 1 capital ratio of above 5.5 percent risked having to raise more capital or sell assets.

While no banks fell below that threshold, Barclays ended with 6.4 percent, Banco BPM with 6.7 percent, and Lloyds with 6.8 percent. Italy's UBI ended with 7.5 percent.

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