Britain's financial system is prepared for even a worst-case Brexit scenario with a hard exit from the European Union and a consequent trade war, the Bank of England has announced.
All the UK's major banks survived this year's so-called "stress tests" conducted by the Bank of England, designed to discover how the country's financial plumbing would fare in the event of a hard Brexit.
The scenario, which goes beyond what most analysts would expect even from a worst-case Brexit, involves a UK recession with Gross Domestic Product falling by 4.7 percent, with interest rates rising to 4 percent and the unemployment rate going up to 9.2 percent and is the toughest test yet thrown at the UK banks.
None of the major banks failed, but two of them - Barclays and Lloyds - would have had to trigger emergency debt-to-equity conversions, based on new accountancy changes coming in from 2023.
The Bank's financial policy committee said: "The core of the UK financial system, including banks, dealers and insurance companies, was resilient to, and prepared for, the wide range of UK economic and financial shocks that could be associated with a worst-case disorderly Brexit."