Bank of England demands improved crisis plans from major UK banks

London (Parliament Politics Magazine) – The Bank of England urges major UK banks to enhance crisis preparations amid concerns over social media-driven panic. 

How Is Social Media Affecting Bank Stability According to the Bank of England?

The Bank of England has pointed to big UK banks including Barclays and Standard Chartered that they are required to improve their preparations for a potential loss as it pushes banks to rapidly evaluate their financial position to control social media speculation sparking consumer panic.

The findings were characteristic of the Bank’s second assessment of whether banks could “safely” shut down without destabilising the financial procedure or immediately requiring taxpayer cash.

What Issues Did the Bank of England Identify in Recent Bank Reviews?

The reexamination which covered Barclays, HSBC, Lloyds Banking Group, Nationwide, NatWest Group, Santander UK, Standard Chartered and Virgin Money UK  is suggested to identify any shortfalls that could lead to a recurrence of the 2008 financial crisis, which caused the UK government to spend £137bn to steady the banking system.

The Bank discovered that all lenders had proved they could safely fail without immediately demanding state intervention. However, it stated it had identified some “new issues” and areas for “further enhancement”, including how fast banks can value their assets and liabilities.

The Bank highlighted the importance of “resolution” planning after last year’s mini-banking situation, which led to the collapse of both Credit Suisse and Silicon Valley Bank, the latter of which had its UK functions taken over in an emergency acquisition by HSBC.

What Enhancements Are Required for UK Banks’ Crisis Management Plans?

The mini-crisis affected the Bank’s latest review, which requested lenders to prove that they could consider their liquidity needs – covering whether they had adequate funds to repay depositors examining to withdraw cash on short notice – within 24 hours. It is part of measures to head off the threats posed by social media speculation, with worried posts on X, then called Twitter, and WhatsApp exchanges having fuelled bank runs, where customers shrink cash at speed, at both Credit Suisse and SVB.

Some experts have stated that social media has turned already problematic bank runs into concerning “bank sprints”. “Given a resolution, the procedure may unfold quickly and various resolution actions may be viewed, firms should be able to update and change rapidly the key input premises of valuation models,” the Bank stated in its report.

The central bank recognised several areas for “further enhancement”. That included how fast Barclays, HSBC and Standard Chartered were capable of providing “timely” and thorough assessments of their assets.

How Did Standard Chartered Perform in the Bank of England’s Review?

Standard Chartered was also singled out as the only “flaw” in the report, corresponding to expectations that banks should be willing to put their restructuring plans into motion. “Resolution, particularly of a large bank, will never be comfortable to execute given the complexity and risks – but it is more useful than the alternative of bailing out a failed bank with public funds,” the Bank stated. The central bank stated it will run and release its next review within the 2026-27 financial year.