Rather, as per previous ACS scenarios, it is a coherent ‘tail risk’ scenario designed to be severe and broad enough to assess the resilience of UK banks to a range of adverse shocks. footnote It is not a set of events that is expected, or likely, to materialise. The stress applied under the ACS is not a forecast of macroeconomic and financial conditions in the UK or abroad resulting from the current geopolitical situation and government responses to it. By using stress tests to determine banks’ ability to withstand an adverse scenario, the Bank aims to ensure they are able to absorb rather than amplify shocks, and serve UK households and businesses. The Financial Policy Committee (FPC) and Prudential Regulation Committee (PRC) will use the test to assess bank balance sheets and the resilience of the UK banking system. The Bank’s 2022 ACS will test the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies, large falls in asset prices and higher global interest rates, and a separate stress of misconduct costs.

This follows two years of Covid-19 pandemic crisis-related stress testing and its decision to postpone the test in March following Russia’s invasion of Ukraine. The Bank of England (Bank) is returning to the annual cyclical scenario (ACS) stress-test framework in 2022.

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