BoE expects larger capital impact in 2018 stress test

UK banks’ capital ratios are likely to fall sharply in this year’s stress test as a result of the introduction of International Financial Reporting Standard 9 (IFRS 9), the Bank of England (BoE) has warned.

Under the new accounting standard, banks’ provisions against loan losses will typically be made earlier in an economic downturn, resulting in a bigger drop in capital ratios compared with previous stress tests.

While the application of IFRS 9 may lead to a significant increase in expected

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