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HSBC, Standard Chartered must address ‘shortcomings’ in plans for a potential bank failure: Bank of England
- Britain’s biggest banks can fail ‘safely’ in a future financial crisis but more work still needed by some, central bank says
- Bank of England’s first review of bank resolution plans to avoid future ‘too big to fail’ situations in a financial crisis
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Chad Brayin London
HSBC and Standard Chartered must address “shortcomings” in their plans to continue to provide “vital banking services” to customers and avoid costs to taxpayers if either bank were to fail in a future financial crisis, the Bank of England has found.
The central bank said HSBC and Standard Chartered, which are both based in London but count Hong Kong as their biggest market, need to address issues surrounding their ability to have adequate financial resources on hand – namely how they identify and project collateral balances available – and to quickly restructure in the event of a bank failure.
“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,” Dave Ramsden, the Bank of England’s deputy governor for markets and banking, said in a statement.
On Friday, the Bank of England announced the results of its examination of the resolution plans of eight of Britain’s biggest banks in its first assessment of whether they could avoid a future “too big to fail” situation. The resolution plan was part of a series of measures adopted by the central bank in 2019 in preparation for a future financial crisis.
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In its review, the central bank found three lenders had “shortcomings” in their plans and four others needed to make “enhancements” to their preparedness strategy. Spanish banking giant Santander’s United Kingdom business was the only lender to not have any additional recommendations.
Overall, the Bank of England concluded that a major bank could fail safely, remaining open to customers with shareholders and investors to be the first in line to bear the costs, rather than taxpayers.
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