Stress testing of banks

antrobus

Graham_Devon wrote: »

.... All I've done is stated what the stress tests were based on.....

And you were wrong, as I have already pointed on this thread.:)

Graham_Devon

antrobus wrote: »

And you were wrong, as I have already pointed on this thread.:)

OK, I'm sure you can tell us what this actually says, if it doesn't say one of the factors was oil at $38 a barrel.

Royal Bank of Scotland and Standard Chartered were the weakest of Britain's seven largest lenders in a Bank of England stress test.

For the second year, the central bank has subjected the UK's biggest lenders to tests to measure whether they would survive a financial shock.

This time, it was assumed that oil had fallen to $38 a barrel and that the global economy had slumped.

No bank was ordered to come up with a new capital plan.
Out of the seven banks tested, RBS and Standard Chartered were found not to have enough capital strength, but both took steps to raise capital, so were not told to come up with a new plan, as Co-Operative Bank was last year.

antrobus

Graham_Devon wrote: »

OK, I'm sure you can tell us what this actually says, if it doesn't say one of the factors was oil at $38 a barrel.

Since you missed it first time around, here is the link to the BoE document 'Stress testing the UK banking system: key elements of the 2015 stress test'

http://www.bankofengland.co.uk/financialstability/documents/stresstesting/2015/keyelements.pdf

For example;

The marked reduction in global nominal demand causes a further reduction in commodity prices. The oil price troughs at US$ 38 per barrel and remains low throughout the scenario. Other commodity markets also see price falls and remain very weak throughout the scenario. This puts additional downward pressure on global inflation.

The low oil price is not the scenario, it is a consequence of the scenario.

paddyrg

wotsthat wrote: »

...what's the sweet spot?...

Excellent question highlighting the whole issue with the analogue world and capitalism. In our analogue, variable world, everything is in constant flux. There is no 'right' position, only ones that benefit one group more than another. That better position then attracts new players, becomes watered down, and the unique/margin is lost, and the cycle continues. There is no black, there is no white, just a continuum between the two extremes...except it's not a linear 2D scale, but a massively multidimensional one, too complex to model.

This is why an honest economist will yell you they're just guessing.

Thrugelmir

paddyrg wrote: »

Excellent question highlighting the whole issue with the analogue world and capitalism. In our analogue, variable world, everything is in constant flux. There is no 'right' position, only ones that benefit one group more than another. That better position then attracts new players, becomes watered down, and the unique/margin is lost, and the cycle continues. There is no black, there is no white, just a continuum between the two extremes...except it's not a linear 2D scale, but a massively multidimensional one, too complex to model.

This is why an honest economist will yell you they're just guessing.

Summed up today with Anglo American shedding 60% of it's workforce in a downsizing exercise. Shows how highly geared (in debt) companies are. Bound to be some pain for the 85,000 workers who are now at risk. As jobs might be there in the future but at the same wages?