Bank of England Report Suggests Major UK Banks May Be Subject to Closure Without Government Assistance During Crisis

A report by the Bank of England has revealed that major UK banks have made significant improvements in their readiness for a potential resolution.

According to the Bank of England (BoE), Britain’s largest banks have shown that they could remain operational in the event of a collapse without requiring government bailouts. This assessment was published on Tuesday, confirming that banks like Barclays, Lloyds, HSBC, NatWest, Santander UK, Standard Chartered, Nationwide, and Virgin Money UK have been evaluated for their ability to manage a crisis effectively.

The BoE introduced new “resolution” regulations following the 2007/2008 Global Financial Crisis, which saw the government injecting £137 billion into the financial sector to ensure its stability.

This evaluation of the banks is a routine post-crisis analysis to prevent taxpayers from bearing the burden of any future bank failures.

The report from the Bank of England indicated that all the mentioned banks have made significant progress in their crisis readiness, ensuring that shareholders and investors would be the first to bear the costs of any potential failure.

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During the Global Financial Crisis, NatWest (formerly the Royal Bank of Scotland) required government assistance, while Lloyds Bank also needed intervention, resulting in the government acquiring a significant stake in the bank. However, Lloyds has since returned to full public ownership.

The Bank of England noted that UK banking institutions are now more stable and prepared compared to 16 years ago. The report on Tuesday found that NatWest, Santander UK, and Nationwide Building Society had no significant issues in their crisis plans, indicating their readiness for a hypothetical failure.

Barclays, Lloyds, HSBC, and Virgin Money UK were identified as needing further enhancements in their contingency planning, while Standard Chartered was the only bank with a noted fault in executing restructuring plans.

None of the banks analyzed by the Bank of England were found to have major issues with their resolution strategies.

“Maintaining a credible and effective resolution regime is an ongoing process, requiring both authorities and firms to adapt to changes in the financial system and regulatory environment,” noted Ramsden.

“Resolvability is a continuous effort, with lessons to be learned from its practical implementation,” he added.

PA Media contributed to this report.