TIDMLLOY
RNS Number : 5143Q
Lloyds Banking Group PLC
30 November 2016
30 November 2016
THE BANK OF ENGLAND STRESS TEST RE-AFFIRMS THE STRONG CAPITAL
POSITION OF LLOYDS BANKING GROUP
Lloyds Banking Group plc (the 'Group'), together with six other
financial institutions in the UK, has
been subject to the 2016 stress test conducted by the Bank of
England (the 'BoE').
The test assesses banks' capital adequacy against their own
minimum Common Equity Tier 1 (CET1) capital and Tier 1 leverage
thresholds. For the Group these thresholds are 7.0 per cent for
CET1 (4.5 per cent Pillar 1 mimima plus 2.5 per cent Group specific
Pillar 2a) and 3 per cent for Tier 1 leverage.
In addition, the test also includes a 'systemic reference point'
('SRP') assessment for globally systemic banks ('G-SIBs'). As the
Group is not a G-SIB, this hurdle rate does not apply.
This year's stress test has been designed under the BoE's new
annual cyclical framework, with the severity of the stress
reflecting the BoE's Financial Policy Committee (the 'FPC') and the
Prudential Regulation Authority (the 'PRA') Board's assessment of
imbalances across financial markets and the global and UK
economies. This resulted in a more severe stress for the UK economy
than in the 2015 scenario. The key economic assumptions impacting
the Group's operations included UK unemployment peaking at 9.5 per
cent, and UK house and commercial property prices falling 31 per
cent and 42 per cent, respectively.
Result of the stress test
Despite the more severe stress on the UK economy, the Group
comfortably exceeds the higher capital and leverage thresholds set
out for the purpose of the stress test; therefore, it is not
required to take any capital action as a result of this stress
test.
In the trough of the stress, the BoE calculated the Group's
estimated CET1 ratio as 9.7 per cent and its leverage ratio as 4.1
per cent pre-management actions, and 10.3 per cent and 4.3 per cent
post-management actions, respectively, compared with a reported
CET1 ratio of 12.8 per cent and leverage ratio of 4.8 per cent as
at 31 December 2015.
The CET1 ratio low point under stress has improved since the
2015 exercise despite the more severe UK stress, reflecting the
successful de-risking undertaken by the Group.
This re-affirms the strong capital and balance sheet position of
the Group.
Further details
Details of the PRA approach to the stress test and the detailed
results in relation to all participating banks are available from
the Bank of England's website.
- END -
For further information:
Investor Relations
Douglas Radcliffe +44 (0)20 7356 1571
Group Investor Relations Director
douglas.radcliffe@finance.lloydsbanking.com
Edward Sands +44 (0)20 7356 1585
Director of Investor Relations
edward.sands@lloydsbanking.com
Corporate Affairs
Matt Smith +44 (0) 20 7356 3522
Head of Corporate Media
matt.smith@lloydsbanking.com
Shella Ali +44 (0) 20 7356 2017
Corporate Media Relations Manager
shella.ali@lloydsbanking.com
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with
respect to the business, strategy and plans of Lloyds Banking Group
and its current goals and expectations relating to its future
financial condition and performance. Statements that are not
historical facts, including statements about Lloyds Banking Group's
or its directors' and/or management's beliefs and expectations, are
forward looking statements. By their nature, forward looking
statements involve risk and uncertainty because they relate to
events and depend upon circumstances that will or may occur in the
future. Factors that could cause actual business, strategy, plans
and/or results (including but not limited to the payment of
dividends) to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such forward
looking statements made by the Group or on its behalf include, but
are not limited to: general economic and business conditions in the
UK and internationally; market related trends and developments;
fluctuations in interest rates (including low or negative rates),
exchange rates, stock markets and currencies; the ability to access
sufficient sources of capital, liquidity and funding when required;
changes to the Group's credit ratings; the ability to derive cost
savings; changing customer behaviour including consumer spending,
saving and borrowing habits; changes to borrower or counterparty
credit quality; instability in the global financial markets,
including Eurozone instability, the exit by the UK from the
European Union (EU) and the potential for one or more other
countries to exit the EU or the Eurozone and the impact of any
sovereign credit rating downgrade or other sovereign financial
issues; technological changes and risks to cyber security; natural,
pandemic and other disasters, adverse weather and similar
contingencies outside the Group's control; inadequate or failed
internal or external processes or systems; acts of war, other acts
of hostility, terrorist acts and responses to those acts,
geopolitical, pandemic or other such events; changes in laws,
regulations, accounting standards or taxation, including as a
result of the exit by the UK from the EU, a further possible
referendum on Scottish independence; changes to regulatory capital
or liquidity requirements and similar contingencies outside the
Group's control; the policies, decisions and actions of
governmental or regulatory authorities or courts in the UK, the EU,
the US or elsewhere including the implementation and interpretation
of key legislation and regulation; the ability to attract and
retain senior management and other employees; requirements or
limitations on the Group as a result of HM Treasury's investment in
the Group; actions or omissions by the Group's directors,
management or employees including industrial action; changes to the
Group's post-retirement defined benefit scheme obligations; the
provision of banking operations services to TSB Banking Group plc;
the extent of any future impairment charges or write-downs caused
by, but not limited to, depressed asset valuations, market
disruptions and illiquid markets; the value and effectiveness of
any credit protection purchased by the Group; the inability to
hedge certain risks economically; the adequacy of loss reserves;
the actions of competitors, including non-bank financial services,
lending companies and digital innovators and disruptive
technologies; and exposure to regulatory or competition scrutiny,
legal, regulatory or competition proceedings, investigations or
complaints. Please refer to the latest Annual Report on Form 20-F
filed with the US Securities and Exchange Commission for a
discussion of certain factors together with examples of forward
looking statements. Except as required by any applicable law or
regulation, the forward looking statements contained in this
document are made as of today's date, and Lloyds Banking Group
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking
statements. The information, statements and opinions contained in
this document do not constitute a public offer under any applicable
law or an offer to sell any securities or financial instruments or
any advice or recommendation with respect to such securities or
financial instruments.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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