UK Edition
Bank of England's Mark Carney and Philip Hammond in bank 'war game’
The Governor of the Bank of England, Mark Carney, and the Chancellor of the Exchequer, Philip Hammond will be tested tomorrow on their reaction to the failure of a major international bank, as part of efforts to end “too big to fail”.
Officials from the US Federal Reserve and European Central Bank will join Mr Carney and Mr Hammond in a so-called “war game” designed to improve how regulators would work together to safeguard the financial system.
The IMF warned in its latest financial stability report that a quarter of banks in advanced economies, with assets worth more than $11 trillion, would remain weak even if the global economy recovered.
Speculation has also surrounded Deutsche Bank’s ability to absorb a proposed $14bn fine from US regulators for mis-selling mortgage-backed securities.
While no individual lenders will be discussed and no specific scenarios are planned, the exercise builds on work started in 2014, when regulators conducted a similar exercise examining the failure of a big Wall Street bank with UK operations, and that of a major UK bank with a division in the US.
Representatives from the Single Resolution Board, established in 2015, which represents more than 140 big eurozone banks, will take part in the cross-border exercise for the first time.
The Financial Stability Board, which is chaired by Mr Carney, has drawn up a list of 30 banks that pose the greatest risk to the global economy if they collapse. HSBC and JP Morgan are judged to be the most systemically important.