Commenting on the Bank of England's system-wide exploratory scenario exercise final report published today, Peter Rothwell, Partner and Head of Banking at KPMG UK, said:
“The results of the SWES have highlighted that, although the resilience of the financial sector has increased overall, risks and vulnerabilities remain.
“It is interesting that the report highlights firms' liquidity risk management as amplifying interconnectivity under stress, driving firms to take more immediate action rather than restoring over time. The Bank has set out areas that it will continue to work on, including enhancing the resilience of the repo markets and gaining greater transparency over corporate bond markets, especially around pension schemes' behaviour in times of shock.
“The SWES also highlights the importance of financial institutions considering system-wide dynamics in their internal risk management and stress tests, and helpfully sets out particular risk factors that market participants may wish to consider.”
