Bank of England warns that high street lenders must be better prepared for a financial crisis

High Street lenders must improve their crisis plans to prepare for a possible collapse, the Bank of England said yesterday.

The findings were part of the central bank’s investigation into whether banks could be closed “safely” without disrupting the financial system or forcing a bailout by taxpayers.

Barclays, HSBC, Lloyds and Standard Chartered were among those told they needed to be more prepared for possible bankruptcy.

The review is designed to prevent a repeat of the 2008 financial crisis, when the last Labour government spent £137bn to stabilise the banking system.

That included a £45bn bailout of NatWest (then known as Royal Bank of Scotland), which 16 years later is still almost 20 per cent owned by the government.

This comes after the rapid collapse of Credit Suisse and Silicon Valley Bank last year.

But while there was room for improvement, the test concluded that taxpayers would now be less likely to have to bail out a failing bank.

Investors and shareholders would be the first to suffer the blow, according to the report.

Banks were determined to be able to remain open and serve customers in a crisis. However, several lenders were asked to make improvements to their plans.

Standard Chartered was singled out for a “deficiency” in its proposal to plan the execution of its identified restructuring options.

The same issue was highlighted in the Bank’s first evaluation, conducted in 2022.

Policymakers said they expect this shortcoming to be addressed and will closely monitor Standard Chartered’s progress.

Threadneedle Street also identified Standard Chartered, Barclays, HSBC, Lloyds and Virgin Money UK as having “areas for further improvement”.

He had no concerns about Santander, Natwest or Nationwide. The bank’s chief executive, Ruth Smith, said: “The findings provide continued reassurance that a major bank could safely enter resolution if necessary.”

‘Stay open and continue to provide vital banking services, with shareholders and investors, not public funds, bearing the first costs of failure.

‘Resolution, especially of a large bank, will never be easy to execute and the system cannot be fully resilient to all possible shocks, no matter how much preparation is done.

“But it is a better alternative than bailing out a failing bank.”