Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

UK banks no longer too big to fail, says BoE

Economy Jun 10, 2022 07:42AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A man stands outside the Bank of England in the City of London, Britain April 19, 2017. Sterling basked in the glow of a six-month high following Tuesday's surprise news of a snap UK election. REUTERS/Hannah McKay

By Iain Withers and Sinchita Mitra

LONDON (Reuters) - The Bank of England is satisfied lenders have taken steps to ensure they are no longer "too big to fail" in any future crisis, it said on Friday, though it did find shortcomings at three leading 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 companies.

The three banks found to have shortcomings were Lloyds (LON:LLOY), Standard Chartered (OTC:SCBFF) and HSBC.

All three were found not to have produced sufficient analysis of their liquidity needs were they to be wound down.

Globe-spanning banks HSBC and Standard Chartered were also found to have failed to produced up-to-scratch restructuring plans.

The central bank said the shortcomings identified would complicate its ability to undertake a resolution but it could still do so safely.

In separate statements on Friday the three banks said 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, the Bank of England's deputy governor for markets and banking.

The other lenders included in the review were Barclays (LON:BARC), NatWest, Nationwide, Santander (BME:SAN) UK and Virgin Money (LON:VM) UK.

Analysts cautioned that it is unclear how well the plans would work if they ever had to be put into action.

"Some will be sceptical as to whether the resolution framework would work exactly as intended in practice in the event of a failure of a high street lender, given the enormous losses it could result in for shareholders and debt investors," said Goodbody banking analyst John Cronin.

The BoE said it would repeat its assessment in 2024 and review progress made by the lenders every two years after that.

The central bank 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 by a year to free up lenders to deal with the COVID-19 pandemic.

In 2018 the U.S. Federal Reserve said that the U.S. arm of Barclays had shortcomings in its resolution plan, but not deficiencies that required a bigger capital buffer.

UK banks no longer too big to fail, says BoE
 

Related Articles

UK retail gets boost from online shopping in July
UK retail gets boost from online shopping in July By Reuters - Aug 19, 2022

By David Milliken LONDON (Reuters) -British shoppers spent more than expected last month as many were enticed by online shopping promotions, despite a weaker picture recently as...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email