BoE's Woods outlines plans to overhaul banking regulation after SVB and Credit Suisse collapses
Sam Woods, deputy governor of the BoE and head of the Prudential Regulation Authority
In a speech last night (16 October), Sam Woods, deputy governor of the BoE and head of the Prudential Regulation Authority, said the central bank was considering new rules that would see the Treasury paying out deposits from small banks in the event of a collapse.
While large banks can maintain depositor continuity through the BoE writing down the value of the long-term debt held by the bank and then recapitalising and restructuring it, small banks do not currently have access to this option, Woods said.
Instead, the current alternative to keep a failed firm open would be having the Bank of England take over directly, leaving the risk that losses would be passed on to the taxpayer, he explained.
Moody's downgrades several regional US banks
«We are therefore exploring with HMT options to maintain continuity of access to deposits in resolution for smaller firms, in a way that minimises the risk to public funds,» Woods said at the annual Mansion House dinner. «I have no doubt that there will be a lively debate as we bring these proposals forward.»
While Woods stressed the importance of adding additional tools to the regulatory framework, he said he was still confident in the stability of the financial system, following reforms made since the Global Financial Crisis, including the tripling of banks' capital levels.
«We now estimate that the UK banking system holds enough capital to survive a global recession worse than the 2008 crisis,» Woods said.
Other changes proposed by Wood in his speech included altering the regulation of foreign bank branches, such as the ones applied to SVB UK.
Group of Credit Suisse bondholders plan lawsuit
Read more on investmentweek.co.uk
