Three of the eight major U.K. banks and building societies reviewed by regulators need to bolster their capital positions, but overall the banking system’s resiliency has improved, according to results of stress tests released this week by the Bank of England.

The eight major firms subject to the stress tests were Barclays Bank, Co-operative Bank, HSBC Bank, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, Santander UK, and Standard Chartered. The exercise, according to the Bank of England, was intended to assess the banks’ ability to withstand a “very severe” housing shock and a sharp rise or snap back of interest rates.

The Prudential Regulation Authority (PRA) Board found capital issues with three of the firms -- Co-operative Bank, Lloyds Banking Group, and Royal Bank of Scotland. The board said the three banks at end-2013 needed to strengthen further their capital positions. The stress test looked at actual and projected ratios of common equity Tier 1 (CET1) capital under various scenarios. For Co-operative Bank, the test showed an actual CET1 ratio of 7.2 percent at the end of 2013. Co-operative’s minimum stressed ratio before the impact of strategic management actions fell to -2.6 percent, and remained at -2.6 percent after the impact of those strategic actions. Lloyds Banking Group had an actual CET1 ratio of 10.1 percent at the end of 2013, with a minimum stressed ratio of 5.0 percent before strategic actions and 5.3 percent after strategic actions. RBS’s actual CET1 ratio for end 2013 was 8.6 percent, which dipped to 4.6 percent for the minimum stressed ratio before strategic actions and 5.2 percent after.

By contrast, the other five banks and building societies ranged from 9.1 percent to 14.3 percent for actual CET1 ratios at the end of 2013. Their minimum stress ratios ranged from 6.1 to 8.7 percent before strategic actions were taken, and from 6.7 to 8.7 percent after the impact of strategic actions.

Only Co-operative Bank was required to submit a revised capital plan, the regulator said. Lloyds and RBS were not required to do so because of continued improvements to their resilience during 2014 and what the PRA Board called concrete plans to boost capital further.

“The stress test completes our capital framework by informing judgments about the appropriate size of capital buffers for individual firms and for the system as a whole,” Mark Carney, governor of the Bank of England, said in a statement. “It is a major component of both our macro- and micro-prudential regimes.”

Carney said the exercise also demonstrated the synergies possible between the PRA and the Financial Policy Committee, which published a report on the stability of the financial sector to accompany the stress test results. The report found that on the whole, the sector’s resilience improved markedly since a 2013 capital shortfall exercise. It also said given the stress test results and the banks’ plans to further improve capital positions, the banking sector would be able to maintain core functions in a stress scenario. As a result, the committee didn’t make any system-wide recommendations for changes or actions.

“This was a demanding test,” Carney said of the exercise. “The results show that the core of the banking system is significantly more resilient, that it has the strength to continue to serve the real economy even in a severe stress, and that the growing confidence in the system is merited.”

The Bank of England will conduct another stress test in 2015, with details to be announced in the new year.

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