Source: Bank of England
Today the Bank of England has published its second assessment for
each of the eight major UK banks under the Resolvability
Assessment Framework (RAF). This is our approach to assessing
whether these firms are prepared for resolution. Our assessment
gives further reassurance that if a major UK bank were to fail
today it could enter resolution safely: 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.
The assessment finds major UK banks have continued to make
progress in improving their preparations for resolution,
including embedding resolution preparations into their everyday
business, and in addressing issues outstanding from the first
assessment in 2022.
The Bank used the second RAF assessment to assess major UK banks'
progress against issues outstanding from the first assessment,
and for the first time to test how their preparations for
resolution work in practice. The assessment focussed on one of
the three outcomes major UK banks need to achieve to be
considered resolvable: having Adequate Financial Resources in the
context of resolution.
As a natural consequence of the more detailed assessment
conducted by the Bank, and the work done by firms themselves to
test their capabilities, this second RAF assessment has
identified new issues, but none of these issues are likely to
impede the Bank's ability to execute a resolution. Further
improvements in the areas identified in this assessment will help
smooth the execution of a resolution.
Banks are expected, as a priority, to address the feedback from
this and the previous RAF assessment, and continuously maintain
and improve their resolvability capabilities.
We will use future RAF assessments to undertake further detailed
analysis of the major UK banks. The next RAF assessment will
focus on the Continuity and Restructuring outcome, including an
assessment of the readiness of the major UK banks to quickly plan
for and execute restructuring options to address the causes of
failure and restore viability.
In light of the progress made to date on resolvability and to
give the Bank and major UK banks time to further enhance and
progress testing of their resolution capabilities ahead of the
next assessment, the PRA will consult on the necessary rule
changes to postpone the third RAF assessment by one year to
2026-27 rather than 2025-26. The Bank will engage with the major
UK banks over the coming months on their workplans and
anticipated areas of focus during this period, so that progress
on resolvability continues to be maintained.
, Deputy Governor for Markets,
Banking, Payments and Resolution, said:
“We welcome the progress made by the major UK banks. Maintaining
a credible and effective resolution regime is a continuous
process, and authorities and firms need to respond as the
financial system and regulatory landscape evolves. Resolvability
will never be ‘done' and there will always be lessons to learn
from putting the regime into practice.”
Notes to editors
1. The eight major UK banks in scope of RAF reporting, whose
disclosures should be read alongside the Bank's assessment, are:
Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest Group,
Santander UK, Standard Chartered and Virgin Money UK. Please see
the firms' own websites for their disclosures.
2. We are not assessing firms because we think they are likely to
experience problems, but so that we and the banks can prepare for
the worst and act if needed.
3. The Bank is the UK's resolution authority. We work with firms
to ensure that they are prepared to enter resolution if needed.
If firms fail, we make sure that happens in an orderly way to
minimise disruption to any of its vital services. This process is
called resolution. See The Bank of England's Approach to
Assessing Resolvability and The Bank of England's approach to
resolution for more information.
4. We assess firms' preparations for resolution based on whether
they can achieve the three resolvability outcomes:
- having adequate financial resources in the context of
resolution;
- being able to continue to do business through resolution and
restructuring; and
- co-ordinating and communicating effectively internally and
with the authorities and markets.
5. The three outcomes are underpinned by policies published by
the Bank and PRA to remove barriers to resolution. Firms need to
meet the objectives of these policies at a minimum to achieve the
resolvability outcomes.
