Could Lloyds bank withstand a 1980s style recession?
As the UK government looks ready to give the green light for a rescue package for Lloyds Bank many people are wondering whether the company is strong enough to withstand a 1980s style recession. Commonly known as the "U" shaped recession this is the worst type of economic slowdown which bottoms out and bounces along the bottom for some time before recovering. Businesses struggle, unemployment goes up and it would take a while for the UK economy to show signs of growth. So is Lloyds Bank equipped to handle such an event?
It has been revealed that the UK government has carried out a number of stress tests which guards the balance sheet of Lloyds Bank and come to the conclusion that in a worst-case scenario similar to the 1980s style recession the company is well positioned to survive. However, while the Treasury are very keen to stress the comparisons with the 1980s recession there are many who feel a depression could well be on the cards. Whether Lloyds bank, and any other UK banking company, could withstand such an economic downturn without substantial government assistance very much remains to be seen.
At this moment in time everything is just guesswork because quite literally nobody has been in this situation for over 70 years.
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