Bank of England Confident in UK Banks’ Crisis Plans

The Bank of England (BoE) believes the major UK banks could enter resolution safely and at a limited cost to the public in a moment of crisis, according to the latest stress test.

The central bank released the Resolvability Assessment of Major UK Banks 2024 on Tuesday, which it said “gives further reassurance”  that, if a major UK bank were to fail today, it could “remain open and continue to provide vital banking services, with shareholders and investors — not public funds — first in line to bear the costs”.

The BoE reviewed the living wills of the UK’s eight biggest lenders — Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest, Santander UK, Standard Chartered and Virgin Money — under its Resolvability Assessment Framework.

While the findings were broadly positive, the BoE named areas for “further enhancement”  in the plans of Barclays, HSBC, Lloyds, Standard Chartered and Virgin Money — including, for Barclays, several contracts that “do not contain resolution-resilient language”  and, for Lloyds, concerns about the firm’s ability to deliver valuations “in sufficient detail in the context of a resolution”.

Standard Chartered was the only bank found to have shortcomings — although none serious enough to hamper its potential resolution. The BoE expressed concerns about Standard Chartered’s ability to execute a chosen resolution strategy and said it will engage with the firm to encourage improvements in this regard.

The report comes in light of the demise of major financial institutions last year including the collapses of Credit Suisse and Silicon Valley Bank (SVB), where the BoE had to step in to stabilize SSVB’s UK business.

The UK arm of SVB was acquired in a last-minute rescue deal by HSBC, while Credit Suisse merged with UBS.

The BoE said in the report that the UK’s major banks had “continued to make significant progress in improving their preparations for resolution” and, since the previous assessment of crisis planning in 2022, had taken steps “including embedding resolution preparations into their everyday business”.