Lenders informed to higher put together for monetary disaster

High Street lenders must improve their crisis plans to prepare for a potential collapse, the Bank of England said yesterday.

The findings were part of the central bank’s investigation into whether banks could ‘safely’ shut down without disrupting the financial system or forcing a taxpayer bailout.

Barclays, HSBC, Lloyds and Standard Chartered were among those told that they need to be more prepared for a potential failure.

The review is designed to avoid a repeat of the 2008 financial crisis when the last Labour government spent £137billion to stabilise the banking system. 

That included a £45billion bail-out of NatWest – then known as the Royal Bank of Scotland – which is still nearly 20 per cent government-owned 16 years later.

At risk: Barclays, HSBC, Lloyds and Standard Chartered were among those told that they need to be more prepared for a potential failure

It comes after the rapid collapse of Credit Suisse and Silicon Valley Bank last year.

But while there was room for improvement, the test found that taxpayers would now be less likely to have to bail-out a failing bank.

Investors and shareholders would be the first in line to take the hit, the report said.

It found that banks would be able to remain open and provide services to customers in a crisis. However, several lenders were told to make improvements to their plans.

Standard Chartered was singled out as having a ‘shortcoming’ in its proposal to plan for the execution of its identified restructuring options.

The same issue was highlighted in the Bank’s first assessment, which was carried out in 2022.

Policymakers said they expect the shortcoming to be addressed, and will closely monitor Standard Chartered’s progress.

Threadneedle Street also identified that Standard Chartered, Barclays, HSBC, Lloyds and Virgin Money UK had ‘areas for further enhancement’.

It did not have any concerns about Santander, Natwest or Nationwide. The Bank’s executive director Ruth Smith said: ‘The findings provide ongoing reassurance a major bank could enter resolution safely if needed.

‘Remaining open and continuing to provide vital banking services, with shareholders and investors, not public funds, first in line to bear the costs of failure.

‘Resolution, especially of a large bank, will never be easy to execute and the system cannot be fully resilient to all possible shocks, no matter how much preparation is done.

‘But it provides a better alternative to bailing out a failed bank.’