New BoE stress tests will be tougher during economic upturns
Stress tests designed to move counter-cyclically with the financial cycle and inform decisions on capital buffers; BoE looking to improve modelling techniques to keep pace
The Bank of England (BoE) is linking its stress tests to the financial cycle with the aim of making them more systematic and counter-cyclical, it said on October 21.
Unveiling plans for the next three years of stress testing, the BoE said it would aim to vary the severity of tests based on whether the financial system is in an upswing or downturn. As exuberance grows the tests are designed to become tougher. Although banks will not know the exact shape of the test in advance, this gives them the
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