UK Banks No Longer Too Big To Fail, Bank of England Declares

The Bank of England (BoE) said on Friday that it is satisfied lenders have taken steps to ensure they are no longer "too big to fail" in any future crisis, though it did find shortcomings at three major banks, Iain Withers and Sinchita Mitra reported for Reuters.

Photo Insert: Bank of England

The BoE wants to prevent banks from requiring taxpayers to bail them out, as happened during the global financial crisis of 2007-2009. The central bank stated that it was generally satisfied that banks could be wound down safely while vital services remained operational, with shareholders and investors bearing the costs rather than taxpayers.

The BoE said in its first public assessment of how failing lenders could be dismantled in a crisis that it had also identified "areas of further enhancement" for six companies. Lloyds, Standard Chartered, and HSBC were identified as having flaws.

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

HSBC and Standard Chartered were also found to have failed to produce up-to-date restructuring plans. The review also included Barclays, NatWest, Nationwide, Santander UK, and Virgin Money UK.

The central bank stated that while the identified flaws would complicate these banks' ability to conduct a resolution, it could still do so safely.

"Safely resolving a large bank will always be a complex challenge so it's important that both we and the major banks continue to prioritize work on this issue," said Dave Ramsden, the Bank of England's deputy governor for markets and banking.

Separate statements issued on Friday by the three banks stated that they were improving their so-called resolution plans and making improvements to address the issues identified.

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