'Banks must plan for crises'

Jul 1 2009 by Iain Laing, The Journal

THE Deputy Governor of the Bank of England has called for a "radical simplification" of some of the biggest banks under contingency plans for future financial crises.

In a speech at the British Bankers’ Association annual conference in London, Paul Tucker said some banks that are “too big to fail” need a structural overhaul to aid rescues attempts in the event of an emergency.

He added that all banks also need detailed contingency planning and information in place to help in times of crisis, echoing comments last week from Bank Governor Mervyn King, who suggested they write a “will” to assist an orderly wind down.

Mr Tucker said: “Banks must structure and run themselves to permit orderly wind down. And they must invest to provide the authorities with the information they need to do so.”

The second in command at the central bank reiterated calls for a pre-funded insurance scheme for savings deposits that is also risk-based to ensure the industry bears the cost of failure.

And banks should have information on their institution and assets ready to hand to help potential bidders in the event of a rescue deal, as well as to aid the authorities in any wind-down.