Bank of England gives verdict on whether they can handle current climate
The UK’s eight major banks are sufficiently prepared to enter resolution without jeopardising public funds, ensuring continued operation and service provision, with shareholders and investors bearing the costs, the Bank of England (BoE) said on Tuesday.
The central bank released its second Resolvability Assessment Framework (RAF) report, evaluating the preparedness of the UK’s eight largest banks for resolution in the event of failure. These banks are: Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest Group, Santander UK, Standard Chartered and Virgin Money UK.
“Our assessment gives further reassurance that if a major UK bank were to fail today, it could enter resolution safely: remaining open and continuing to provide vital banking services, with shareholders and investors – not public funds – first in line to bear the costs of failure,” the BoE said in a statement.
The report also highlighted progress made by the banks since the first assessment in 2022, particularly in integrating resolution preparations into their daily operations. The latest assessment focused on whether the banks have adequate financial resources to manage resolution effectively.
The review found that while some new issues have emerged, these are not expected to hinder the Bank of England’s ability to execute a resolution if necessary. It also emphasised the importance of continued improvement in these areas to facilitate smoother resolutions in the future.
The major banks, which are unsurprisingly the UK’s largest mortgage lenders too – are expected to prioritise addressing the feedback from both the current and previous assessments and to continually enhance their resolvability capabilities. The next assessment will concentrate on the Continuity and Restructuring outcome, evaluating banks’ readiness to implement restructuring plans swiftly and restore viability after a failure.
In response to the progress noted and to allow further enhancement of resolution capabilities, the Prudential Regulation Authority (PRA) plans to consult on delaying the third RAF assessment by one year, from 2025-26 to 2026-27, while the BoE will continue to engage with the banks to ensure ongoing progress in their resolvability efforts.
“We welcome the progress made by the major UK banks,” said Dave Ramsden, deputy governor for markets, banking, payments and resolution at the Bank of England. “Maintaining a credible and effective resolution regime is a continuous process, and authorities and firms need to respond as the financial system and regulatory landscape evolves. Resolvability will never be ‘done’ and there will always be lessons to learn from putting the regime into practice.”
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