On 27 June 2024, the Bank of England (BoE) announced that it would be carrying out a desk-based stress test in 2024, which will test the resilience of the UK banking system to two hypothetical scenarios including severe but plausible combinations of adverse shocks to the UK and global economies.
The exercise will not involve firm submissions of stressed projections but will instead use the BoE’s own estimates of the impact of the stress scenarios on the resilience of the UK banking system.
The scenarios
The two hypothetical scenarios are countercyclical and linked to the Financial Policy Committee’s assessment of the underlying level of risks and vulnerabilities in the UK and global economies and financial markets. The scenarios are:
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The supply shock scenario, which sees a severe, negative global aggregate supply shock from an increase in geopolitical tensions and global commodity prices and supply-chain disruptions. This leads to higher-than-expected inflation across advanced