BoE publishes two new stress test scenarios for 2025 Bank Capital Stress Test

The Bank of England (BoE) has updated its stress testing webpage, announcing it has published two stress test scenarios for use by banks and building societies that are not participants in its concurrent stress testing exercise. These scenarios have been drawn from the 2025 Bank Capital Stress Test scenario published on 24 March to support concurrent stress testing of the largest UK banks and building societies. The scenarios serve as a template and severity benchmark for firms to support their own internal capital adequacy assessment process (ICAAP) stress testing scenario design processes. The intention behind publishing two different scenarios is to encourage firms to evaluate the type, characteristics and severity of stress their business model may be vulnerable to when designing their own stress testing scenarios. The BoE refers firms to the Supervisory Statement on the ICAAP and the supervisory review and evaluation process (SREP) for guidance on the role of stress testing within the framework for setting banks' and building societies' capital requirements. The BoE explains that firms should use the scenarios as a starting point to build and accurately calibrate their own scenarios under Pillar 2, noting that any single scenario designed for firms with diverse business models and risks has its limitations. Therefore, it expects firms to select scenarios that robustly challenge their business and, ultimately, be responsible for creating their own scenarios to test resilience.

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