Three major UK banks must bolster capital further but only the Co-operative Bank must submit a revised capital plan to the authorities, the Bank of England said today in its stress test results.

Lloyds Banking Group, Royal Bank of Scotland and Co-operative Bank must strengthen their capital further but only the Co-operative Bank must submit a revised capital plan to the authorities, the Bank of England said today as it revealed stress test results on eight UK institutions.

Following stress tests issued a few weeks ago by the European banking authorities, the Prudential Regulation Authority (the supervisor of banking strength run by the BoE) said that as at the end of 2013, three of the eight banks “needed to strengthen their capital position further”.

“But, given continuing improvements to banks’ resilience over the course of 2014 and concrete plans to build capital further going forward, only one of these banks (Co-operative Bank) was required to submit a revised capital plan,” it said in a statement. The scope of the tests included events such as a 35 per cent fall in house prices, a sharp rise in interest rates and a surge in unemployment to 12 per cent.

“Following on from the EU-wide stress test, the 2014 UK stress test of the eight major UK banks and building societies was designed specifically to assess their resilience to a very severe housing market shock and to a sharp rise or snap back in interest rates. This was not a forecast or expectation by the Bank of England regarding the likelihood of a set of events materialising, but a coherent, severe ‘tail risk’ scenario,” the central bank continued.

The eight banks and building societies tested as part of this exercise were Barclays Bank, Co-operative Bank, HSBC Bank, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, Santander UK and Standard Chartered.

“There was substantial variation across the banks and building societies in terms of the impact of the stress scenario. From an individual-institution perspective, the Prudential Regulation Authority (PRA) Board judged that this stress test did not reveal capital inadequacies for five out of the eight participating banks, given their balance sheets at end-2013 (Barclays, HSBC, Nationwide, Santander UK and Standard Chartered). The PRA Board did not require these banks to submit revised capital plans.