The Bank of England will check whether banks can be smoothly wound down in a crisis from October, it said on Monday.
The news comes in light of the collapse of Credit Suisse earlier this year and its forced takeover by UBS. The BoE is also wary of this area, having facilitated HSBC’s takeover of Silicon Valley Bank’s UK business.
The BoE said that leading banks will have to submit an assessment of their resolvability plans by 6 October. These plans, colloquially known as ‘living wills’, must contain details of how the bank would wind down while ensuring that core activities like payments and deposits remain operational.
It added that these assessments will be more closely scrutinised than in the first check of eight top firms last year, with lenders braced to potentially provide more data and live demonstrations.
In a public letter to the chief financial officers of leading banks, the BoE 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.”
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