All the main U.K. banks passed the Bank of England's 2019 stress test, for which the scenario was more severe than the actual financial crisis and included a disorderly Brexit, though banks saw greater losses on corporate exposures than previously.
The central bank is also doubling the size of countercyclical buffer — a rainy day fund that is built up in good economic times — to 2% of risk-weighted assets from 1%.
Barclays PLC, HSBC Holdings PLC, Lloyds Banking Group PLC, Nationwide Building Society, Royal Bank of Scotland Group PLC, Santander UK Group Holdings PLC, and Standard Chartered PLC were each tested with a stress test that envisaged world GDP falling by 2.6%, U.K. GDP dropping by 4.7%, the bank rate rising to 4% and the U.K. unemployment rate rising to 9.2%.
The tests included a range of shocks that could be associated with a worst-case disorderly Brexit, said the BoE said, but U.K. banks could keep lending in this scenario.
Indeed, banks' aggregate core capital CET1 ratio would remain more than twice its level before the financial crisis.
Barclays passed, but came out at the bottom of the pack, with its ratio falling to 8.9% under the stress scenario, from 13.2%, against a "hurdle rate" of 8.1%.
The BoE said losses on corporate exposures are higher than in previous tests and this reflects some deterioration in asset quality along with a more severe global scenario. But this, along with weakness in banks' underlying profitability, did not stop all seven banks and building societies remaining above their hurdle rates even if they had to pay large sums in misconduct charges.
Banks' resilience is partly down to their ability to cut dividend payments, bonuses and coupon payments on bail-in-able additional Tier 1 bonds.
The BoE warned investors to be aware that the banks would make such cuts as necessary if the need arose.
It is the third year in a row that all seven lenders have passed the test.
The central bank said the increase in the countercyclical buffer would allow banks to absorb £23 billion of losses without cutting back on lending.