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Bank of England: Top UK banks no longer too big to fail

Bank of England  The London headquarters of HSBC and Barclays banks, at Canary Wharf in east London. Many banks are moving assets from London to other EU cities in the face of uncertainty over Brexit. Picture date: Monday December 3, 2018. Photo credit should read: Matt Crossick/ EMPICS Entertainment.
The Bank of England has found that if a major UK bank failed today it could do so safely. Photo: Matt Crossick/ EMPICS Entertainment. (Empics Entertainment)

The Bank of England (BoE) has found that the UK’s eight biggest banks could fail “safely”, without jeopardising customers or taxpayers.

The central bank’s report into the self-assessment of eight banks found none of the top UK banks should require a public bailout in the event of a crisis.

The report covers Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest, Santander UK, Standard Chartered and Virgin Money UK.

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In its first public assessment of how failing lenders could be dismantled in a crisis without taxpayer handouts, the BoE said it had identified “shortcomings” for three banks: HSBC (HSBA.L), Lloyds Banking Group (LLOY.L) and Standard Chartered (STAN.L).

HSBC has been asked to take steps to improve the resolvability of its international infrastructure, which spans 64 countries and territories.

There were six banks whose plans contained “areas for further enhancement”, the second best assessment that the Bank could give.

These included two for Barclays (BARC.L), two for HSBC, one for Nationwide, two for Natwest (NWG.L), one for Standard Chartered, and three for Virgin Money (VMUK.L).

Only Santander UK’s plan escaped unscathed from the Bank’s assessment.

Barclays said it had “identified some areas for further refinement, including continued optimisation of processes and use of automation where appropriate, which it will continue to progress”.

The BoE is aiming to stop banks from being too big to fail requiring taxpayers to bail them out as it did in the global financial crisis.

That resulted in paying £137bn of public money to support lenders including the Royal Bank of Scotland and shore up the financial system.

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Dave Ramsden, deputy governor, said the new regime "successfully reduces risk to depositors and the financial system and better protects the UK's public funds".

“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,” he added.

It found that as things stand now shareholders and investors, not taxpayers, will be first in line to bear any costs of failure. It will repeat this assessment every two years.

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