Bank of England says UK lenders have taken steps to ensure they are no longer ‘too big to fail’
The Bank of England found shortcomings at three major banks — Lloyds, Standard Chartered and HSBC
10 June 2022 - 11:25
byIain Withers and Sinchita Mitra
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The Bank of England building is reflected in a sign in London, Britain. File photo REUTERS/TOBY MELVILLE
London — The Bank of England (BoE) said on Friday it was satisfied lenders had taken steps to ensure they were no longer “too big to fail” in any future crisis, though it found shortcomings at three major banks.
The BoE is aiming to stop banks from requiring taxpayers to bail them out, as happened in the 2007-09 global financial crisis.
The central bank said it was satisfied overall that banks could be wound down safely while keeping vital services open, with shareholders and investors in line to bear the costs rather than taxpayers.
In its first public assessment of how failing lenders could be dismantled in a crisis, the BoE said it had also identified “areas of further enhancement” for six firms.
The three banks found to have shortcomings were Lloyds, Standard Chartered and HSBC.
All three were found not to have produced sufficient analysis of their liquidity needs in the event of a wind down.
HSBC and Standard Chartered were also found not to have produced up-to-scratch restructuring plans for the globe-spanning banks.
The central bank said the shortcomings identified would unnecessarily complicate its ability to undertake a resolution, but said it could still do so safely.
All three banks said in separate statements on Friday they were making enhancements to address the issues identified and were improving their so-called resolution plans.
“Safely resolving a large bank will always be a complex challenge so it’s important that both we and the major banks continue to prioritise work on this issue,” said Dave Ramsden, deputy governor for markets and banking at the Bank of England.
The other lenders included in the review were Barclays, NatWest, Nationwide, Santander UK and Virgin Money UK.
The Bank of England said it would repeat its assessment in 2024 and review progress made by the lenders every two years after that.
The BoE has powers to force lenders to make structural changes if it feels there are barriers to fast and orderly closure.
Publication of the review was delayed a year to free up lenders to deal with the Covid-19 pandemic.
In 2018, the Federal Reserve said the US arm of Barclays had shortcomings in its resolution plan, but not deficiencies that required a bigger capital buffer.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Bank of England says UK lenders have taken steps to ensure they are no longer ‘too big to fail’
The Bank of England found shortcomings at three major banks — Lloyds, Standard Chartered and HSBC
London — The Bank of England (BoE) said on Friday it was satisfied lenders had taken steps to ensure they were no longer “too big to fail” in any future crisis, though it found shortcomings at three major banks.
The BoE is aiming to stop banks from requiring taxpayers to bail them out, as happened in the 2007-09 global financial crisis.
The central bank said it was satisfied overall that banks could be wound down safely while keeping vital services open, with shareholders and investors in line to bear the costs rather than taxpayers.
In its first public assessment of how failing lenders could be dismantled in a crisis, the BoE said it had also identified “areas of further enhancement” for six firms.
The three banks found to have shortcomings were Lloyds, Standard Chartered and HSBC.
All three were found not to have produced sufficient analysis of their liquidity needs in the event of a wind down.
HSBC and Standard Chartered were also found not to have produced up-to-scratch restructuring plans for the globe-spanning banks.
The central bank said the shortcomings identified would unnecessarily complicate its ability to undertake a resolution, but said it could still do so safely.
All three banks said in separate statements on Friday they were making enhancements to address the issues identified and were improving their so-called resolution plans.
“Safely resolving a large bank will always be a complex challenge so it’s important that both we and the major banks continue to prioritise work on this issue,” said Dave Ramsden, deputy governor for markets and banking at the Bank of England.
The other lenders included in the review were Barclays, NatWest, Nationwide, Santander UK and Virgin Money UK.
The Bank of England said it would repeat its assessment in 2024 and review progress made by the lenders every two years after that.
The BoE has powers to force lenders to make structural changes if it feels there are barriers to fast and orderly closure.
Publication of the review was delayed a year to free up lenders to deal with the Covid-19 pandemic.
In 2018, the Federal Reserve said the US arm of Barclays had shortcomings in its resolution plan, but not deficiencies that required a bigger capital buffer.
Reuters
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