LONDON & CAPITAL BANK STRESS TEST
BY LONDON & CAPITAL'S INVESTMENT DESK
FIXED INCOME STRATEGY – GLOBAL BANK STRESS TEST ASSESSMENT
Exposure to the banking sector is a key strand of the London& Capital Fixed Income strategy. As the Covid-19 crisis has escalated, the sector has come under pressure, along with other credit sectors.
Several points are worth highlighting in light of recent market moves are:
- The market stress has come from the Covid-19 pandemic, and the expectation is that it will push the global economy into recession. The global banking system has not been at the centre of these developments, unlike the Great Financial Crisis (GFC).
- The DW banking sector is extremely strong, and this can be seen by the extremely high CET1 and Leverage ratios, typically around 13.5% and 5.5% respectively.
- London & Capital Strategy is geared to only the strongest of the global DW banks, the G-SIBs and national champions, see the appendix for the list of our selected banks below.
- The authorities (central banks, the IMF and governments) have made it clear that policy is prioritised to ensure that credit continues to flow through to the real economies during these extraordinary times and to do this, banks must be the lifeblood of the economic system.