The Bank of England, under the leadership of Sam Woods, is reassessing its regulatory criteria regarding the establishment of formal subsidiaries by international banks in the UK. This review comes on the heels of Silicon Valley Bank's collapse, which had been operating as a UK branch for a decade before being required to subsidiarise. The incident has amplified concerns about potential loopholes in existing regulations for bank branches serving small and mid-sized businesses in the UK.
Woods, who heads the Prudential Regulation Authority (PRA), voiced these concerns at Mansion House's City Banquet on Monday. He suggested a regulatory reassessment might be necessary to ensure the effectiveness of existing criteria. Despite this, Woods clarified that this is not a comprehensive reform but an effort to enhance targeted areas. He assured that most branch business will stay unaffected.
The United Kingdom hosts more than 150 branches with assets around £6.3 trillion. The country relies heavily on this branch model to maintain its status as a global financial hub. The PRA's review was triggered by concerns that the current regulations might not be sufficient to prevent another situation like Silicon Valley Bank's collapse.
In addition to the review of subsidiary rules, Woods also commented on Basel III global reforms pertaining to capital requirements. He predicted no significant shifts in the UK's aggregate capital levels due to these reforms.
Nicholas Lyons, Lord Mayor of London, suggested implementing a secondment program as part of the response to these recent banking issues. This program would aim to boost collaboration between government officials, regulators, and the financial industry, potentially aiding in regulatory improvements and preventing future banking collapses.
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