The 2021 solvency stress test will assess the major UK banks and building societies against a UK and global scenario that reflects a severe path for the current macroeconomic outlook.

The Bank of England’s (hereafter ‘the Bank’) approach to concurrent solvency stress testing aims to use periods when the economy is growing to build up banks’ buffers of capital, ready to be drawn on to support the economy in a stress. Once the economy enters a real stress, such as that driven by the Covid-19 (Covid) outbreak, the focus changes. At this point stress tests are used to assess whether the buffers of capital that banks have built up are large enough to deal with how the prevailing stress could unfold.

Following the Covid outbreak, the Bank cancelled the 2020 concurrent stress test and instead undertook desktop analysis of the resilience of the UK banking sector to the unfolding stress