International banks could be forced to set up subsidiaries in the UK as an answer to help solve some of the problems resulting from the dramatic collapse this year of Silicon Valley Bank earlier this year.
The move could reduce the thresholds requiring foreign banks with corporate business in the country to set up subsidiaries, with their own capital and liquidity.
The Bank of England is considering plans to force the move, according to a report in the Financial Times.
How overseas banks operate in the UK is the subject of a review following the SVB collapse, the report said, while in the US President Joe Biden has also called on regulators to implement reforms.
If banks operate using a subsidiary, such as SVB did in London, it enables local regulators to seize control of failing banks rather than leaving their fate to the discretion of their parent companies’ supervisors.
But compelling more banks to set up such units is likely to be unpopular with the industry, since full-blown subsidiaries are more expensive than merely maintaining branches in the UK, the report added.
The SVB UK subsidiary was bought by the UK subsidiary of HSBC Holdings PLC (LSE:HSBA) for £1 in March.