This has included a major push by regulators to require that financial firms make preparations for worstcase scenarios rather than “hoping for the best”4. In addition, the shift in regulatory regimes after the crisis mean that banks now are much better capitalised and, as underlined by the recentlypublished EBA stress tests, have a greater capacity to absorb adverse shocks.
At the same time, if a hard Brexit generates sharp movements in asset prices and in the Sterlingeuro exchange rate or is associated with a significant macroeconomic downturn in the UK, the balance sheets of financial firms with exposures to the UK will be affected.