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Sunday, April 14, 2024

BoE Considers Making Foreign Banks Set Up Subsidiaries in UK

The Bank of England is looking at plans to force more international banks to set up subsidiaries in the U.K., The Financial Times reported on Tuesday. The BOE is considering the plan as a part of a review of the collapse earlier this year of the U.S. bank Silicon Valley Bank, the newspaper said, citing people familiar with the matter. The move could reduce the thresholds requiring foreign banks with corporate business in the country to set up subsidiaries, which must have their capital and liquidity. Subsidiaries also enable local regulators to seize control of failing banks much more quickly than with branches.

The BOE is reassessing whether its supervisory approach suggests that foreign banks with more than PS100m of retail and small business transaction deposits should have a subsidiary in the U.K., according to the paper. The paper noted that the SVB failure, which some believe highlighted the benefits of subsidiaries, prompted the BOE to consider lowering those thresholds.

However, the paper said the bank has yet to decide whether to pursue the changes and would start by launching an industry consultation before taking any final decision. The Treasury will be kept informed of the process.

A senior official at the BOE involved in the SVB review told the paper that while the central bank was clear that it should have more powers to intervene when needed, it would not want to heap further burdens on banks. “We don’t want to get in the way of the free movement of funds, but we will need to be able to respond in a timely fashion when a crisis develops,” the official was quoted as saying.

In the aftermath of SVB’s collapse, the BOE has been criticized for not doing enough to prevent the bank’s troubles. In its 102-page report, the Federal Reserve detailed the various issues that led to SVB’s demise and suggested that regulators were aware of most of them for too long before they took decisive action.

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