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Law360, London (March 20, 2020, 10:22 AM GMT ) The Bank of England said Friday that it is canceling its annual stress test of U.K. lenders and delaying new scrutiny of climate risk and open-ended funds, allowing banks to focus on lending into the economy during the COVID-19 crisis.
The Bank of England is dropping this year's stress tests for the country's eight major banks and building societies because of the coronavirus. (iStock)
The lenders, which include HSBC and Royal Bank of Scotland PLC, have already shown they can withstand "deep simultaneous recessions" in the U.K. and global economies, as well as large falls in asset prices during the 2019 stress test, the BoE said.
The move echoes plans by the European Banking Authority last week to delay this year's biennial stress test for European Union banks until 2021 to allow lenders to focus on their operations and support their customers.
The BoE said Friday it would review its supervision plans so that it is not asking financial companies for data that is not critical. The authority said it will also postpone on-site visits where appropriate.
"This will allow supervisory engagement to focus on the most important matters relating to financial stability, the safety and soundness of firms and protection of policyholders, including the impact of COVID-19," the central bank said.
The central bank said it is shelving its regulatory reports on bank liquidity and climate risk until further notice. The BoE said it will take stock of responses to a consultation on climate change and will be announcing how it will move forward with any proposals in the summer.
The BoE also is putting on hold a joint review with the Financial Conduct Authority into open-ended funds so that they can concentrate on dealing with the fallout from the coronavirus pandemic.
"These measures will provide flexibility to help firms and [financial market infrastructures] maintain their safety and soundness and deliver the critical functions they provide to the economy," the bank said.
The measures come after the bank decided last week to temporarily remove the countercyclical capital buffer for banks for at least 12 months to release £190 million ($221 million) into the economy. Europe and Ireland have also released banks from the requirement to shore up their capital buffers.
The BoE at the time slashed its key interest rate for bank refinancing to 0.25% from 0.75%. The central bank cut the rate even further on Thursday to 0.1% — the lowest level ever.
--Editing by Tom Mudd.
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