Five of Britain’s biggest banks were today instructed to improve their readiness for failure after the sudden demise of major financial institutions last year highlighted the speed with which they can collapse. The Bank of England today named Barclays, HSBC and Lloyds among firms that needed to strengthen their preparedness for failure, warning they must be “sufficiently flexible and able to produce timely and robust estimations of their liquidity needs in a resolution, given the speed at which events can evolve, for example due to rapid deposit outflows.”
The scale of the risks latent within the banking sector was revealed last year by the rapid collapse of Credit Suisse and Silicon Valley Bank (SVB), which sent shockwaves through financial markets. Within a day of SVB’s warning that it needed a capital raise, the firm’s share price sunk 60% and as much as $40 billion or nearly a third of its deposits had been withdrawn, with a further $100 billion on course to leave. The UK arm of SVB was acquired shortly thereafter in a last-minute rescue deal by HSBC, while Credit Suisse was merged with UBS.
