Could lenders survive if recession gets deeper?...

01 June 2009

2319 Reads
2 Comments

Written by rosalind renshaw

Just when you thought it was time for us all to cheer up and enjoy the sunshine, along comes a ‘stress test’ by the Financial Services Authority.

The FSA has revealed that it has been ‘stress testing’ banks and building societies, to see if they could cope with the recession carrying on for at least another 18 months.

The ‘stress test’ also assumes a 6% shrinking of the economy from peak to trough, with growth not returning until 2011, unemployment rising to 3.7m people and house prices falling 50% from peak to trough.

It also assumes a 60% fall in commercial property values.

The FSA implies that all banks and building societies passed the stress test, with their capital reserves not falling below 4% of assets.

The FSA’s stress test, which follows a similar exercise in the US, will not result in publishing detailed information.

Comments

- smell the coffee
If he FSA Stress Tests only used the conditions set out above and they stuggled to survive with just 4% Asset/loan ration, then they are screwed. Because the reccession is likely to be longer. deeper and harder than that.
- 03 June 2009 08:19 AM
- Mr Glum
So what is the point??
- 01 June 2009 16:57 PM

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