Britain's banks should be able to weather a Brexit-related slowdown without having to raise new capital, the Bank of England said Tuesday after its regular stress tests of the country's biggest lenders, but cautioned that a longer transition period will be needed to safely navigate an exit from the European Union.
The Bank's Financial Policy Committee said none of the lenders tested would need to add to their capital buffers -- although Barclays Plc (BCS) - Get Report and Royal Bank of Scotland plc (RBS) - Get Report would have failed had they not raised fresh cash earlier this year -- but also noted that a multitude of events could stress the financial system's resilience as Britain prepares to fully withdraw from the EU in March of 2019 without a definite trade agreement.
"The combination of a disorderly Brexit and a severe global recession and stressed misconduct costs could result in more severe conditions than in the stress test," the Bank of England said. "In such circumstances, capital buffers would be drawn down substantially more than in the stress test and, as a result, banks would be more likely to restrict lending to the real economy."
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