Bank of England to test UK's biggest lenders on trade meltdown scenarios amid concerns over Trump's tariffs
The Bank of England is preparing to test whether UK lenders are able to cope in the event of a global trade meltdown – amid deepening concerns over Donald Trump’s tariff war.
Britain’s seven biggest banks and building societies will be subjected to a hypothetical scenario in which global tensions mount, leading to trade fragmenting.
They will be tested to see whether their balance sheets can cope with a scenario in which global trade slumps by a fifth and oil and gas prices spike to levels last seen when Russia invaded Ukraine in 2022.
It would also see the UK economy shrink by 5 per cent and unemployment double, with inflation hitting 10 per cent, interest rates being hiked to 8 per cent and house prices tumbling by 28 per cent. Meanwhile, global GDP would shrink by 2 per cent.
The scenario does not mention Trump but comes at a time when the fall-out from his decision to launch a tariff war with his major trading partners is troubling the Bank’s policy makers. Last week, the Bank warned of an increase in ‘geopolitical and global trade policy uncertainty’ which was likely to persist.
The Bank’s stress test – which takes place every two years – will gauge the ability of Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest, Santander UK and Standard Chartered to cope.
Tests: The Bank of England is stress testing Britain’s seven top banks and building societies with a hypothetical scenario in which global tensions mount, leading to trade fragmenting
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