Headlines
Bank of England focuses on trade war in 2025 stress test of central counterparties
Published by Global Banking and Finance Review
Posted on April 25, 2025
Global Banking and Finance Review
Company
Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.
Published by Global Banking and Finance Review
Posted on April 25, 2025
By David Milliken
LONDON (Reuters) -The Bank of England said on Friday it will focus on a scenario involving a market panic about a trade war and sovereign debt risks in this year's stress test of central counterparties, which form a key part of global financial infrastructure.
The stress test covers ICE Clear Europe, LCH Limited which is owned by LSEG, and LME Clear Limited, owned by Hong Kong Exchange and Clearing, and will model the default of two or more members during a severe market stress.
The BoE said the test was "intended to represent extreme market moves over a period of two to five days in which there is escalating concern about fragmentation in global trade and sovereign debt risks".
The scenario would include a big fall in share prices, higher expectations for central bank interest rates and divergent moves in commodities prices, the BoE added.
The results of this year's test will be published in the final quarter of the year, and are calculated using prices and participant positions from the end of trading on March 26.
This year's test would not include a full liquidity stress test but would look at liquidity risks alongside the impact of margin calls.
Last year's stress test found some vulnerabilities but overall showed resilience, the BoE said.
LME Clear, the clearing house of the London Metal Exchange, was found to be most vulnerable in that test, which was based on an escalation of geopolitical and trade tensions culminating in an upward shock to commodities markets.
(Reporting by David Milliken; editing by William James)