UK banks press for scrapping stress tests in face of coronavirus - sources

* Test scenarios are due in late March

* Bankers want focus on real test, not theory

* BoE governor, finance minister met bankers

By Iain Withers and Huw Jones

LONDON, March 13 (Reuters) - Britain's banks have asked the
Bank of England to scrap this year's stress test of lenders and
to soften rules to help them cushion expected losses as the
coronavirus pandemic hits their staff and customers, banking
sources said on Friday.

"It would be stupid to run a stress test during a stress," a
senior banker told Reuters. "Let's concentrate on this situation
rather than a hypothetical one."

The central bank's Financial Policy Committee, which
monitors risks in the financial system, typically agrees
scenarios for the annual test of banks' resilience at its first
quarter meeting and publishes them on March 24.

Results usually come out at the end of year.

Top bankers met Britain's finance minister Rishi Sunak and
Bank of England Governor Mark Carney on Thursday to discuss
action to help smaller businesses hit by coronavirus. Andrew
Bailey, who takes over from Carney on Monday, was present.

A second banking source said scrapping the stress tests was
one of several support measures discussed with the central bank.

The BoE declined to comment on the stress test. The Treasury
said it was a matter for the BoE.

After allowing banks to fully tap a special buffer of
capital to support lending this week, the central bank's
Financial Policy Committee is expected to review whether to go
ahead with the stress test.

The European Union regulators on Thursday said the bloc's
own test that was under way had been postponed until 2022.

Banks have also asked Sunak and Carney for relief from an
accounting rule that forces them to provision early for loans at
risk of turning sour, the two sources said.

Bankers are concerned a mandatory international accounting
rule, known as IFRS 9 and which was introduced in 2018, will
force them to book bad loans earlier than in previous crises,
likely exacerbating early bank losses and hits to capital.

Sunak and Carney were told it could deter lenders from
providing necessary relief to struggling businesses and
consumers, if the banks feared hefty provisions.

"Don't force banks to do things that are unhelpful ... How
do you avoid that double whammy?" the banker said.

The BoE has repeatedly said the British banking sector is
holding enough capital.

Banks are already being forced to adapt to how they operate
to minimise potential infections from the virus.

HSBC told all staff in Britain on Friday to avoid
travelling between its offices, practice social distancing
measures and work from home where possible.

(Reporting by Iain Withers and Huw Jones; Editing by Edmund
Blair)