The regulator on Friday ordered the three lenders to rectify issues, including how they would finance themselves if they had problems and how they would serve customers well. The BoE said four other major UK banks needed to make “improvements” to their consolidation plans. Banks were called upon to set up so-called consolidation plans as part of 2019 measures to ensure that 2007-08 crisis rescue programs were not repeated, even if lenders collapsed. Taxpayers were forced to spend tens of billions of pounds to bail out the Royal Bank of Scotland and Lloyds in 2008 as their funding ran out. The regulator had promised parliament that the big banks would be “solved” by 2022. The British subsidiary of Spain’s Santander was the only one of the UK’s top eight banks to emerge from the BoE rating without recommendations for improvement. The BoG stressed that while there are many areas for improvement, all banks could go bankrupt safely, “remaining open and continuing to provide vital banking services to the economy”. The central bank ratings reflect those conducted by US regulators under the leadership of the Federal Reserve since 2016. “When the Fed and the FDIC did their assessment, there was a clear desire for some failures to get further work done,” said Alastair Morley, a Deloitte associate. “The bank [of England] he decided to be more optimistic. “ The banks’ plans were judged on how they would finance themselves until their disappearance, how they would continue to run their businesses smoothly, and how they would communicate their plans and coordinate decision-making. Financing – a key point in the 2007-8 crisis, when banks turned to emergency support after running out of regular funding sources – was the area where the BoE identified most of the problems. HSBC, Lloyds and Standard Chartered all had funding “weaknesses” and NatWest, Nationwide and Virgin UK were called upon to make “improvements” to address less serious issues. HSBC, the UK’s largest bank in terms of assets, was also found to have deficiencies in its restructuring plans during its collapse, as did Standard Chartered. In a statement, HSBC said it had been asked to take steps to improve the resolution of its international infrastructure, which spans 64 countries and territories. “The changes that would be required to this infrastructure to support some of the restructuring measures that may be needed to resolve them would be complex,” the bank said, adding that it had been working on the issue for several years. Shares of HSBC fell 0.9% at the beginning of trading. Standard Chartered has been criticized for failing to identify and evaluate “all available restructuring options in a wide range of consolidation scenarios”. The bank said it had “strengthened” its restructuring plan and would assess the credibility of those plans each year. Weaknesses in Lloyds’ consolidation financing plans included issues with the bank’s ability to make “timely and robust decisions” about its liquidity. In a statement, Lloyds said it was already making some improvements to address the BoE’s concerns. NatWest, Barclays and Virgin Money were criticized for their plans to ensure they could function smoothly through a collapse and were asked to make improvements. NatWest said it is working to improve the robustness and accuracy of record keeping. Virgin UK said the BoE had identified weaknesses related to the “execution of restructuring options and flexibility in cost options” and “the Group will continue to work with the BoG on these elements”. Barclays said it had “identified a number of areas for further improvement, including continuous process optimization and the use of automation where needed, which it will continue to pursue.” “Securing a large bank will always be a complex challenge, so it is important that both we and the big banks continue to prioritize this issue,” said Sir Dave Ramsden, deputy governor for markets and banks in the BoE. Additional report by Siddharth Venkataramakrishnan
