Bank of England says UK lenders clear stress tests

By Phoebe Seers and Tommy Reggiori Wilkes

LONDON, Dec 2 (Reuters) - The seven biggest British lenders have enough capital to withstand a deep global recession, large falls in financial markets and a jump in interest rates, the Bank of England said on Tuesday after conducting its latest stress tests.

The tests covered Barclays, HSBC, Lloyds Banking Group, NatWest Group, Santander UK, Standard Chartered and building society Nationwide, which collectively account for 75% of lending to the UK real economy.

The BoE said all participating banks remained above their minimum regulatory requirements, and that no lender was required to strengthen its capital position as a result of the test. Data published showed that Standard Chartered and Barclays had the lowest capital positions after the stress test while Nationwide showed the strongest performance.

Banks entered the stress test with an aggregate Tier 1 capital ratio of 14%, which fell to a low of 11%, leaving around 60 billion pounds in capital above minimum buffer requirements. Lenders began the exercise with substantial headroom over regulatory buffers, the BoE said.

The adverse shocks the BoE subjected lenders to included a 300% jump in gas prices, a 5% contraction in economic output in the UK and a 2% decline in world GDP, a 28% drop in domestic house prices and a BoE bank rate at 8%.

The BoE typically conducts bank stress tests every other year.

British banks have built up capital levels above regulatory minimum requirements, aided by a surge in profitability in recent years thanks to income from higher rates and a benign economic backdrop. Many lenders' shares are trading at their highest levels since the aftermath of the 2008-09 financial crisis.

In publishing its Financial Stability Report on Tuesday, the BoE also eased capital requirements for banks from 14% to 13%.

(Reporting by Phoebe Seers and Tommy Reggiori Wilkes, editing by Lawrence White)