Four Years of Concurrent Stress Testing at the Bank of England: Developing the Macroprudential Perspective

Rohan Churm and Paul Nahai-Williamson

The Bank of England introduced concurrent stress testing of the UK banking system in 2014. All stress-testing frameworks reflect the institutional factors and operating environment relevant to the jurisdiction in which they are implemented, and the UK is no different. The regulatory framework in the UK was re-shaped in response to the global financial crisis. The Bank of England was charged with new microprudential and macroprudential responsibilities, under the supervision of the Prudential Regulation Committee (PRC)11 Formerly the Prudential Regulatory Authority (PRA) board. The Bank of England and Financial Services Act 2016 brought the PRA within the single legal entity of the Bank of England and replaced the PRA board with the PRC. The statutory objectives of the PRA remained unchanged. and the Financial Policy Committee (FPC), respectively. The FPC recommended regular stress testing of the UK banking system in 2013 (Bank of England, 2013), and the framework has since evolved with the aim of supporting microprudential and macroprudential objectives in a comprehensive and coordinated way.

The main microprudential objective of the concurrent stress tests22 In addition to the

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