The United Kingdom is home to more than 150 branches with about £6.3 trillion in assets. — Bloomberg
LONDON: The Bank of England (BoE) is reviewing its rules that determine when international banks are required to set up a formal subsidiary after the collapse of Silicon Valley Bank showed it was easier to seize control of such operations in the event a bank fails.
Silicon Valley Bank operated as a branch in the United Kingdom for a decade before regulators finally required it to subsidiarise, Sam Woods, chief executive officer of the BoE’s Prudential Regulation Authority, said in prepared remarks during the City Banquet at Mansion House.
That’s left regulators worried that their existing criteria might not catch another bank branch that offers similar deposit and transactional services to small and mid-sized UK companies.
“For that reason, we are thinking about our approach to branching,” he said. “This is not about fundamental reform, but about whether there are any targeted areas for improvement.”
Woods added that the vast majority of branch business would be unaffected.
The United Kingdom is home to more than 150 branches with about £6.3 trillion in assets.
It’s typically more costly for international banks to set up separately capitalised subsidiaries rather than operating as branches, and Woods noted that offering the branch model is key to the United Kingdom remaining a financial centre.
“They significantly reduce the barriers to international banking business, are important for competitiveness and are part of the city’s lifeblood,” Woods said. “That is not going to change.”
In the wide-ranging speech, Woods also weighed in on the latest global reforms governing capital requirements known as Basel III because they’re tied to an international overhaul that started more than a decade ago in response to the financial crisis of 2008.
Top US regulators unveiled their plans for implementing the rules in July.
The proposed changes would mean the eight largest US banks would have to increase capital by about 19%, leading JPMorgan Chase and Co and Citigroup Inc to push back against them. — Bloomberg
