TOP NEWS: UK's big lenders no longer too big to fail - Bank of England

Fri, 10th Jun 2022 08:52

(Alliance News) - The Bank of England on Friday said the UK's high street banks are no longer "too big to fail" after it completed its assessment of the the eight "major" lenders in the country.

In its Resolvability Assessment Framework, the UK central bank said shareholders and investors, and not taxpayers, are in line to "bear the costs" if any bank suffers a collapse.

"In 2007-08, the UK did not have a regime to enable resolving banks without the use of public money. This left two choices when some got into trouble: let banks fail and cause huge disruption or bail them out with taxpayers' money," the BoE said.

Now, however, the central bank said it now has a "robust" framework to deal with the fallout of a banking crisis.

"The bank's assessment of resolvability shows that even if a major UK bank were to require resolution, customers would be able to keep accessing their accounts and business services as normal. Shareholders and investors, not taxpayers, would be first in line to bear banks' losses and the costs of recapitalisation," the central bank said.

The eight banks to take part in the assessment were HSBC Holdings PLC, Barclays PLC, NatWest Group PLC, Lloyds Banking Group PLC, Standard Chartered PLC, Banco Santander SA's UK operations, Virgin Money UK PLC and Nationwide Building Society.

As a result of the framework, the BoE said the UK is in better shape to deal with the fallout of a banking crisis. Each bank was asked to how its services - such as lending and deposit-taking - could continue if its 'failed'. The resolution rules are designed to give authorities the time they need to restructure the firm or wind it down.

Dave Ramsden, deputy governor for Markets & Banking at the BoE, said: "The Resolvability Assessment Framework is a core part of the UK's response to the global financial crisis, and demonstrates how the UK has overcome the problem of 'too big to fail'.

"The UK authorities have developed a resolution regime that successfully reduces risks to depositors and the financial system and better protects the UK's public funds. 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."

The BoE said it the next assessment will be in 2024, and will be repeated every two years thereafter.

By Paul McGowan; paulmcgowan@alliancenews.com