HSBC & Standard Chartered are most vulnerable UK banks to 'China stress test'
HSBC and Standard Chartered are the British lenders most at risk from exposure to Chinese credit, RBC Capital Markets analysts have said. The Bank of England (BoE) is due to release a report into the strength of the UK's biggest lenders on Wednesday, having carried out three rounds of stress testing. The first round replicated a UK housing price collapse and the second a Chinese recession alongside a Hong Kong property crash. However, Autonomous Research analysts have predicted that Royal Bank of Scotland and Barclays are likely to be named the weakest performers in the BoE report.
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The Bank of England (BoE) is poised to unveil the strength of Britain's largest lenders and HSBC and Standard Chartered are the most at risk of failure due to an exposure to Chinese credit, according to analysts from RBC Capital Markets.



BoE to focus on 'Chinese credit'

BoE officials have played out three rounds of stress testing to date and gauged the seven major U.K. banks' performance with the results due to be released on Wednesday. The first testing round simulated a collapse in U.K. housing prices while the second round replicated a recession in China alongside a property crash in Hong Kong. "The market is concerned with Barclays on the stress test it seems, but the planned management actions and the dynamic nature of the U.K stress test we expect puts Barclays in a better position than HSBC and Standard Chartered with the BoE's focus on Chinese credit," RBC Capital Markets analysts wrote in a November 14 note.

Regulatory action

In contrast, Autonomous Research LLP predicted that Barclays and Royal Bank of Scotland (RBS) are most likely to be the weakest performers. The pair are even forecast to have failed, albeit marginally, according to media reports. Any such failure, however marginal, would represent a significant blow for two of Britain's largest banks although the BoE stress test is focused on the finances of the lenders at the end of 2015. Since then Barclays and RBS have managed to improve their capital. Autonomous Research argued that it would therefore not be necessary for regulatory action to be taken.

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