The Bank of England (BOE) has determined that emergency preparation at the UK’s largest banks guarantees that none would require a public bailout in the event of a catastrophe.
The central bank’s long-awaited answer to eight lenders’ self-assessments, including HSBC Holdings Plc and Barclays Plc, determined that their internal processes should prevent the type of state involvement required in the 2008 global financial crisis, even if businesses collapse. As a result, taxpayers have paid billions of pounds to subsidize companies such as the Royal Bank of Scotland.
According to Dave Ramsden, the BOE’s deputy governor for markets and banking, the resolution regime “reduces risks to depositors and the financial system and better safeguards the UK’s public finances.” Customers will be able to access their accounts as usual if a bank is forced to close, according to the central bank.
Barclays, HSBC, Lloyds Banking, Nationwide, NatWest, Banco Santander’s UK unit, Standard Chartered, and Virgin Money UK were among the institutions whose plans were scrutinized.
While the BOE identified no substantial flaws in banks’ preparations, it did find flaws in how HSBC and Standard Chartered worked out their access to liquid capital and restructuring alternatives in a crisis. Lloyds, which was bailed out following its merger with HBOS in 2008, was likewise found to have failed in its liquidity analysis.
The so-called resolvability evaluation is being disclosed for the first time. The BOE instructed lenders to evaluate themselves in 2019, however the intended publishing date was pushed back because to the Covid-19 outbreak. The evaluation will be performed in 2024 and every two years after that.
According to the research, the vulnerabilities might make it more difficult for top management and regulators to “take fast and strong judgments in a resolution.” All three banks have promised to address the issues, with HSBC stating that their modifications “may be implemented over a multi-year period.”
The examination also discovered “areas for additional improvement” for six corporations, implying that only Santander’s unit received a clean bill of health.
Each company must provide a report outlining how key services like as lending and deposit-taking would be maintained if the firm failed. The resolution regulations are intended to provide authorities or new management the time needed to reorganize or wind down the organization.
For example, in its summary, Barclays stated that the separation of its retail banking and investment banking operations had simplified the group and reduced the likelihood that customers and clients would be put at risk due to a failure in another part of the company or shocks to global financial markets.