The Bank of England (BoE) has announced that the UK's eight major banks are now better prepared to face potential failure without requiring taxpayer-funded bailouts, according to its latest assessment published on 6 August 2024.

The central bank's second Resolvability Assessment Framework (RAF) evaluation, which examined the preparedness of institutions including HSBC, Barclays, Lloyds Banking Group, and NatWest Group, found that these banks could enter resolution safely if they were to fail. This means they could continue providing vital banking services while shareholders and investors, rather than public funds, would bear the costs of failure.

Dave Ramsden, deputy governor for markets, banking, payments and resolution at the BoE, stated: "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."

The assessment, which also included Nationwide, Santander UK, Standard Chartered, and Virgin Money UK, focused on the banks' ability to have adequate financial resources in the context of resolution. This is one of three key outcomes that major UK banks need to achieve to be considered resolvable.

While the BoE noted that banks have continued to make progress in improving their preparations for resolution since the first assessment in 2022, the more detailed evaluation conducted this time has identified new issues. However, the central bank emphasised that none of these issues are likely to impede its ability to execute a resolution if necessary.

Standard Chartered was the only bank found to have a "shortcoming", related to its restructuring planning capabilities. Barclays, HSBC, Lloyds Banking Group, and Virgin Money UK were advised to enhance some aspects of their plans. Nationwide, NatWest Group, and Santander UK had no material issues identified.

The BoE expects banks to address the feedback from this and the previous RAF assessment as a priority, and to continuously maintain and improve their resolvability capabilities.

In light of the progress made, the Prudential Regulation Authority (PRA) will consult on postponing the third RAF assessment by one year to 2026-27. This extension aims to give both the BoE and the major UK banks more time to enhance and test their resolution capabilities further.

The resolvability assessments were introduced following the 2007-09 global financial crisis, which saw many banks rescued with public money. The framework aims to ensure that banks have credible plans for dealing with potential collapse without destabilising the financial system or requiring taxpayer-funded bailouts.

The BoE emphasised that resolvability is an ongoing process, stating: "Resolvability will never be 'done' and there will always be lessons to learn from putting the regime into practice."

This assessment provides reassurance to the public and financial markets that the UK's major banks are better prepared to face potential crises without resorting to taxpayer-funded rescues, marking a significant improvement in the resilience of the UK banking sector.

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