UK Regulators Could Kick Out Bank Chiefs Under New Stress Test Plans
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Senior bankers at top U.K. financial institutions could be fired, or even sent to jail for up to seven years, if theirs bank fails to meet new stress test requirements proposed by the Bank of England on Tuesday, according to a report by The Telegraph.
Senior bankers at top U.K. financial institutions could be fired, or even sent to jail for up to seven years, if theirs bank fails to meet new stress test requirements proposed by the Bank of England on Tuesday, according to a report by The Telegraph.
The draft law is just one of a series of 86 proposed amendments included to the U.K.’s Banking Reform Bill, which would provide a more stringent approval regime for bankers, stronger regulatory powers to boost competition in the industry, and new laws to “bail in” bank creditors in the event of a lenders’ collapse so as to spare taxpayers the cost of another bail-out.
The Bank of England added that the stress test of the U.K.’s biggest banks would be conducted annually, starting from 2014; with the largest banks required to hold more capital than their international rivals or “at the very least, banks would need to maintain sufficient capital to be able to absorb losses in the stress scenario and not fall below internationally agreed minimum standards,” the Bank of England said.
Medium-sized British banks are likely to face a cut-down version of the test, and clearing houses could face their own health checks later on, the central bank added.
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Unlike past stress test, the Bank of England said that it would most release all findings to the public on a bank-by-bank basis alongside any plans by the lenders to make good of their shortcomings.
[quote]”Stress-testing can provide a quantum leap in transparency and accountability,” said the Bank of England’s Deputy Governor Paul Tucker to the Financial Times. “We need to engage society – public, parliament – in debates about the resilience of the financial system and how we are supervising it in the good times as well as in bad times.”[/quote]“We believe that a stress-testing regime can enhance the quality of the Bank’s macro and micro… supervision and, over time, underpin confidence in the banking system,” he added to The Independent.
U.K. banks have until January 10 next year to respond to the proposed new laws. The tests were designed to be considerably tougher than those mandated by E.U. regulators, who are likely to conduct similar investigations into Britain’s largest banks next year.
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Mike Trippitt, director of banks’ research at Numis Securities in London, told Reuters that U.K. banks were already starting to see strong enough profits to build up capital buffers that would meet even a pessimistic stress test scenario.
[quote]”The capital position of banks is pretty strong and without looking at the detail of the stress tests, what the market is saying is that these banks should be able to fare well,” Trippitt said.[/quote]
