(MENAFN- AzerNews)
By Trend
The bank of England is satisfied lenders have taken steps to
ensure they are no longer 'too big to fail' in any future crisis,
it said on Friday, though it did find shortcomings at three leading
banks, Trend reports with reference to Reuters .
The BoE is aiming to stop banks from requiring taxpayers to bail
them out, as happened in the 2007-09 global financial crisis.
The central bank said it was satisfied overall that banks could
be wound down safely while keeping vital services open, with
shareholders and investors in line to bear the costs rather than
taxpayers.
In its first public assessment of how failing lenders could be
dismantled in a crisis, the BoE said it had also identified 'areas
of further enhancement' for six companies.
The three banks found to have shortcomings were Lloyds, Standard
Chartered and HSBC.
All three were found not to have produced sufficient analysis of
their liquidity needs were they to be wound down.
Globe-spanning banks HSBC and Standard Chartered were also found
to have failed to produced up-to-scratch restructuring plans.
The central bank said the shortcomings identified would
complicate its ability to undertake a resolution but it could still
do so safely.
In separate statements on Friday the three banks said they were
making enhancements to address the issues identified and were
improving their so-called resolution plans.
'Safely resolving a large bank will always be a complex
challenge so it's important that both we and the major banks
continue to prioritise work on this issue,' said Dave Ramsden, the
Bank of England's deputy governor for markets and banking.
The other lenders included in the review were Barclays, NatWest,
Nationwide, Santander UK and Virgin Money UK.
Analysts cautioned that it is unclear how well the plans would
work if they ever had to be put into action.
'Some will be sceptical as to whether the resolution framework
would work exactly as intended in practice in the event of a
failure of a high street lender, given the enormous losses it could
result in for shareholders and debt investors,' said Goodbody
banking analyst John Cronin.
The BoE said it would repeat its assessment in 2024 and review
progress made by the lenders every two years after that.
The central bank has powers to force lenders to make structural
changes if it feels there are barriers to fast and orderly
closure.
Publication of the review was delayed by a year to free up
lenders to deal with the COVID-19 pandemic.
In 2018 the U.S. Federal Reserve said that the U.S. arm of
Barclays had shortcomings in its resolution plan, but not
deficiencies that required a bigger capital buffer.
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