By Huw Jones
LONDON (Reuters) – The Bank of England said on Monday it will check from October whether top banks can be smoothly wound down in a crisis after the forced takeover of Credit Suisse raised questions about the credibility of “resolvability” plans.
The BoE said leading banks, such as HSBC, Lloyds, NatWest and Barclays, would have to submit an assessment of their own resolvability plans, also dubbed “living wills”, on Oct. 6.
Resolvability refers to winding down a bank while ensuring that core activities such payments and deposits remain operational to minimise disruption to markets and customers.
The BoE said the banks’ assessments will be scrutinised more closely than in the first check last year of eight top firms. Lenders may be called on to provide more data this time round, provide “live demonstrations”, and further documentation, it said.
“Recent market events have demonstrated that it is impossible to predict exactly how a live scenario will unfold, and have highlighted the continued importance of maintaining a credible and effective resolution regime,” the BoE said in a public letter to chief financial officers of leading banks.
The Bank stepped in to help engineer a takeover of the UK subsidiary of Silicon Valley Bank by HSBC, rather than closing it down or introducing a temporary fix.
The global banking sector was rocked by Switzerland forcing a takeover of an ailing Credit Suisse by its domestic rival UBS Group rather than closing down the bank.
This raised questions about the resolvability rules introduced after struggling banks were bailed out by taxpayers during the global financial crisis over a decade ago, which regulators are now studying.
BoE Governor Andrew Bailey said this month that what happened at Credit Suisse did not follow the “playbook” and there must be no ambiguity over resolution plans at banks.
(Reporting by Huw Jones; Editing by Tomasz Janowski)
