Copyright © BusinessAMBE 2023

The Bank of England (BoE) finds major lenders "ready" for resolution. Britain's eight largest banks, including HSBC, Barclays and Lloyds, have been found by the BoE to be capable of being liquidated in a crisis without requiring immediate taxpayer money. The BoE conducted its second "resolvability" review of these lenders, which also included Santander UK, Standard Chartered, Virgin Money UK and Nationwide.

The BoE's assessment found that none of the banks had serious problems that would prevent their resolution in a crisis. While some "weaknesses" or areas for "further improvement" were identified, they did not pose significant risks to the stability of the financial system.

Unwinding banks without bailouts: an important lesson from the global financial crisis

The BoE stressed that the ability to resolve a failing bank without destabilizing the financial system or calling on taxpayers was an important lesson from the 2007-2009 global financial crisis. Many lenders had to be bailed out with public money during this period, underscoring the need for credible plans to deal with bank failures.

"Our assessment provides further reassurance that if a major British bank were to fail today, it could safely go into resolution: remain open and continue to provide essential banking services, with shareholders and investors - not public funds - first in line to bear the costs of failure," the BoE said in a statement.

Resolution plans banks under scrutiny

Standard Chartered was the only bank with a deficiency regarding its restructuring planning capabilities. The BoE expects the bank to address the problem and will follow up. Barclays, HSBC, Lloyds and Virgin Money had to improve some aspects of their plans.

Nationwide, NatWest and Santander UK had no material problems, according to the BoE's assessment. The bank stressed that new global resolution rules have been introduced to ensure that banks have credible plans to deal with failures.

The importance of international cooperation

The BoE stressed the importance of the commitment of international authorities to ensure that the resolution framework and plans for global systemic banks remain credible. Last year's events, including Switzerland forcing UBS to take over troubled Credit Suisse, demonstrated the need for a robust resolution regime.

"Resolution will never be 'done' and there will always be lessons to be learned," said Dave Ramsden, Deputy Governor of the BoE, in a statement.

Key points

- Most major British banks have been deemed capable of being liquidated in a crisis without taxpayer support.
- The Bank of England's assessment identified some weaknesses or areas for improvement, but these did not pose significant risks to the stability of the financial system.

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