BOE: UK Banks Need to Show They Can Fail ‘Safely’

Three of the U.K.’s biggest lenders need to do more to show they could fail without harming customers and taxpayers, the Bank of England (BOE) said Friday (June 10).

According to the Financial Times, the BOE conducted its first assessment of whether HSBC, Lloyds Banking Group and Standard Chartered had made proper preparations to manage their — theoretical — collapse.

The bank has ordered each lender to fix issues, including the steps they’d take to fund themselves if they ran into trouble, and also ordered four other major banks in the U.K. to enhance their own plans.

The regulator stressed that although there were many places where the banks could improve, they, like all of the banks, could potentially fail while still “remaining open and continuing to provide vital banking services to the economy,” the FT said.

The banks were told to draft resolution plans to avoid a repeat of the bailouts stemming from the 2007-08 financial crisis, even if the lenders went under. Much like in the U.S., taxpayers in the U.K. were forced to spend tens of billions to bail out banks such as Lloyds and the Royal Bank of Scotland as their funding disappeared.

The Bank of England has pledged to the British parliament that the big banks would be “resolvable” by this year.

Just one of the U.K.’s top eight banks made it through the BOE assessment without recommendations for improvement: the British offshoot of Santander, based in Spain.

Read more: UK Financial Watchdog Says HSBC Breached Open Banking Rule

In April, U.K.’s Competition and Markets Authority (CMA) said HSBC UK has breached open banking provisions by “failing to make continuously available accurate, comprehensive and up to date product and service information, through application programming interfaces (APIs), to Third Parties and to comparison tools.”

According to the CMA, HSBC breached the regulations by either failing to publish information or by publishing incorrect information through open banking APIs. In one case, the CMA said the bank omitted the daily fee charge in relation to its Kinetic overdraft offering.

Weeks earlier, the CMA  had written to Barclays and Lloyds warning them about similar breaches.