UK’s biggest lenders are no longer too big to fail, says BOE

Bloomberg

The Bank of England (BOE) has concluded that emergency planning at the UK’s biggest banks means none should require a public bailout in event of a crisis.
The central bank’s long-awaited response to the self-assessments of eight lenders, including HSBC Holdings Plc and Barclays Plc, found that their internal systems should avert the kind of state intervention needed in the 2008 global financial crisis even if firms were to fail. That resulted in taxpayer paying billions of pounds to support entities like the Royal Bank of Scotland.
The resolution regime “reduces risks to depositors and the financial system and better protects the UK’s public funds,” said Dave Ramsden, deputy governor for markets and banking at the BOE, in a statement on Friday. The central bank added that even if a bank needed to be wound down, customers would be able to keep accessing their accounts as normal.
The lenders whose plans were reviewed were Barclays, HSBC, Lloyds Banking, Nationwide, NatWest, Banco Santander’s UK arm, Standard Chartered and Virgin Money UK.
While the BOE found no material issues in banks’ plans, it did identify shortcomings in the way HSBC and Standard Chartered worked out their access to liquid funds and their options for restructuring in a crisis. Lloyds, which was bailed out after its 2008 merger with HBOS, was also found to have fallen short on its liquidity analysis.
This is the first time the so-called resolvability assessment has been published. The BOE ordered lenders to examine themselves in 2019 but the initial publication deadline was delayed following the outbreak of Covid-19. The assessment will be repeated in 2024 and every two years thereafter.

The issues could make it harder for senior management and regulators “to take timely and robust decisions in a resolution,” according to the report. All three banks have pledged to work on the shortcomings with HSBC saying its changes “will potentially be executed over a multi-year period.”
The review also found “areas for further enhancement” for six firms, meaning only Santander’s unit emerged with a clean bill of health.
Each firm must produce a report showing how vital services such as lending and deposit-taking could continue, were the firm to fail. The resolution rules are designed to give authorities or new management the time they need to restructure the firm or wind it down.
In its summary, for instance, Barclays said that the separation of its retail banking from investment banking operations had simplified the group and reduced the chance that customers and clients would be put at risk from a failure in another part of the company or shocks to the global financial markets.