The annual tests measured the preparedness of various banks to deal with a global recession or a sudden fall in house prices.
RBS failed the annual checkup and is now forced to embark on a £2billion program of cuts to ensure it can handle another crisis, without folding at immense cost to the taxpayer.
Lloyds, HSBC, Santander UK, Barclays and Nationwide were also tested amid a financial climate the Bank of England has described as boasting an ‘elevated risk’ of crisis as lending rates begin approaching 2008 levels in the aftermath of the Great Recession.
The key threats identified by the BoE are a rise in unemployment to 9.5%, oil dropping to $20 a barrel, UK GDP falling by 4.3%, global GDP receding to minus 2%, China entering recession and UK house prices collapsing by more than 30%.
The test analysed the readiness of the banks in the event of £44 billion being wiped of the value of the capital markets in two years. Despite RBS’ woeful performance the BoE found that the British banking system would be able to withstand such a calamity, even if only by the skin of its teeth.