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UK banks to disclose ability for orderly closure in a crisis

UK banks to disclose ability for orderly closure in a crisis
FILE PHOTO: A man walks past the Bank of England in the City of London, Britain, February 7, 2019. REUTERS/Hannah McKay -
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Hannah Mckay(Reuters)
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LONDON (Reuters) – Britain’s major banks will have to tell investors in 2021 if they can be closed down without creating havoc in financial markets, the Bank of England said on Tuesday.

A decade after Britain had to bail out lenders like Royal Bank of Scotland and Lloyds during the 2007-09 financial crisis, large UK banks will have to show they can be closed or “resolved” in an orderly way so that customer deposits and some core services are unaffected.

“Increased transparency about the resolution regime is in the public’s interest and also incentivises firms to make further progress on their resolvability,” BoE Deputy Governor Jon Cunliffe said in a statement.

The United States already requires banks to disclose if they are “resolvable”.

The BoE has set a 2022 target for major banks to be resolvable, such as forcing them to hold special debt that can be written down to replenish capital buffers.

Under the new framework the BoE published on Tuesday, banks with retail deposits of more than 50 billion pounds ($61 billion) must publicly disclose summaries on their own resolvability assessments by June 2021.

At the same time, the BoE will publicly disclose this assessment for the major UK banks, setting out any factors that are preventing orderly resolvability by the 2022 target date at each major lender.

Although not a formal pass or fail, markets could pile pressure on lenders that are required to take further action to meet the resolvability target.

(Reporting by Huw Jones, editing by Andy Bruce)

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