Biggest UK lenders including Natwest, Lloyds and Nationwide could fail safely in a crisis, Bank of England says
The Bank of England has said any major UK lender could be safely wound down in a crisis without causing disruption to banking services or forcing a taxpayer bailout.
The central bank, which is responsible for ensuring that if a lender fails, it does so in an orderly way, said in a report on Tuesday that the UK’s major banks had “continued to make significant progress in improving their preparations for resolution”.
It added that since its previous assessment of crisis planning in 2022, banks had taken steps “including embedding resolution preparations into their everyday business”.
The Bank reviewed the so-called “living wills” of the UK’s eight biggest lenders under its Resolvability Assessment Framework (RAF) – Barclays, HSBC, Lloyds Banking Group, Nationwide, Natwest, Santander UK, Standard Chartered and Virgin Money.
The Bank found some areas for “further enhancement” in the plans of Barclays, HSBC, Lloyds and Virgin Money, while it also named Standard Chartered as the only bank to have “shortcomings” – although none serious enough to hamper its potential resolution.
A Standard Chartered spokesperson commented: “The BoE noted that Standard Chartered has made significant progress against the issues identified in 2022. Standard Chartered remains committed to working with the BoE and other authorities to continuously improve its preparedness for resolution.”
Nationwide, Natwest and Santander passed through with “no material issues”.
“Today’s findings provide further reassurance that a major UK bank could enter resolution safely if needed: remaining open and continuing to provide vital banking services, with shareholders and investors – not public funds – first in line to bear the costs of failure,” the report said. “This continues to address the ‘too big to fail’ problem.”
“Resolvability will never be ‘done’ and there will always be lessons to learn from putting the regime into practice,” added Dave Ramsden, the Bank’s deputy governor for markets, banking, payments and resolution.
After the UK government was forced to inject £137bn of public money into the financial sector during the financial crisis, new “resolution” rules were introduced to ensure banks had adequate plans for their hypothetical collapse, such as how they would ensure continuity of payments and transfer deposits elsewhere.
These issues came into focus last year after the Swiss government intervened to rescue Credit Suisse, brokering a deal for it to be taken over by domestic rival UBS to stave off its closure.
The Bank of England also stepped in last year to stabilise Silicon Valley Bank’s UK business after its US parent collapsed that March.
The Bank said on Tuesday that the latter saga “demonstrated that we remain ready and able to use the resolution regime to protect financial stability if required to do so”.
It added that its regulatory arm, the Prudential Regulation Authority, would consult on rule changes to delay the next RAF assessment by one year to 2026-27 in light of the “significant progress” made since 2022’s test.