The Bank of England has told big UK banks including Barclays and Standard Chartered that they need to improve their preparations for a potential failure as it pushes banks to rapidly assess their financial position to prevent social media speculation sparking consumer panic.
The findings were part of the Bank’s second assessment of whether banks could “safely” shut down without destabilising the financial system or immediately requiring taxpayer cash.
The review – which covered Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest Group, Santander UK, Standard Chartered and Virgin Money UK – is meant to identify any shortfalls that could lead to a repeat of the 2008 financial crisis, which forced the UK government to spend £137bn to steady the banking system.
The Bank found that all lenders had proved they could safely fail without immediately requiring state intervention. However, it said it had identified some “new issues” and areas for “further enhancement”, including how quickly banks are able to value their assets and liabilities.
The Bank stressed the importance of “resolution” planning after last year’s mini banking crisis, which led to the failure of both Credit Suisse and Silicon Valley Bank, the latter of which had its UK operations taken over in an emergency acquisition by HSBC.
The mini-crisis influenced the Bank’s latest review, which asked lenders to prove that they could assess their liquidity needs – covering whether they had enough funds to repay depositors looking to withdraw cash on short notice – within 24 hours.
It is part of efforts to head off the risks posed by social media speculation, with anxious posts on X, then called Twitter, and WhatsApp exchanges having fuelled bank runs, where customers withdraw cash at speed, at both Credit Suisse and SVB.
Some experts have said that social media has turned already worrisome bank runs into concerning “bank sprints”.
“Given a resolution scenario may unfold quickly and various resolution actions may be considered, firms should be able to update and revise rapidly the key input assumptions of valuation models,” the Bank said in its report, released on Tuesday.
The central bank identified a number of areas for “further enhancement”. That included how quickly Barclays, HSBC and Standard Chartered were able to provide “timely” and detailed assessments of their assets.