Stress test ‘pass’ headline masks some key facts | KPMG | UK
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Stress test ‘pass’ headline masks some key facts

Stress test ‘pass’ headline masks some key facts

Reacting to the Bank of England stress test results


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Reacting to the Bank of England stress test results, Rob Smith, Banking Partner, KPMG UK says:

“UK banks are robustly capitalised and as a result none of them this year needed to resubmit their capital plans. However, the ‘pass’ headline masks the fact that six out of the seven banks experienced higher losses than last year and regulatory capital buffers need to be increased reducing some of the excess capital in the system.

“The risks surrounding consumer credit really comes to light in these results. Over half the impairment losses come from consumer credit. Higher interest rates provide a £23bn boost to bank revenues which will ultimately be borne by the man and woman on the street through higher payments on mortgages and credit cards. For investors and bank staff there are some important headline figures. Under the stress, dividends diminish with £26bn held back in the first two years, this is a significantly bigger cut than we saw last year. Looking at remuneration it’s a similar picture, with banks forecasting a material reduction in their variable remuneration from £9bn over 2017-2018 to £0.5bn under the stress scenario.”

On IFRS9 Steven Hall, Partner, KPMG UK added:

“On the cusp of transition to the new accounting standard, IFRS9, it is conspicuous by its absence in today’s publication. Whilst the BOE always said it wouldn’t publish individual bank IFRS9 impacts, the fact they get no mention at all, even in aggregate, suggests that the impact on the key consumer lending credit card portfolio could be more significant than feared.”


Notes to editor:
For further information please contact:
Christina Bridge, KPMG UK
T +44 (0) 207 311 4252
M: +44 (0) 778 950 4905

KPMG Press office
Tel: +44 (0) 207 694 8773

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 13,500 partners and staff. The UK firm recorded a revenue of £2.07 billion in the year ended 30 September 2016. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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