Lloyds Banking, HSBC and Standard Chartered were all told they need to do better by the Bank of England in its latest tests to measure their financial strength.
Called resolution plans, this latest exercise was to show that if they did fail they could be wound down in an ‘orderly fashion' without the need for a huge taxpayer bailout.
In effect, the test was to prove that shareholders, not taxpayers, would bear the costs if a bank needs rescuing in the future.
That wasn’t the case in the financial crash of 2009 when Lloyds and NatWest (then Royal Bank of Scotland) were rescued by the government for huge sums.
Barclays needed Middle East funding to get it out of a hole sparked by the banking crisis following the collapse of Lehman Brothers.
The BoE said it had identified “shortcomings” in the plans of HSBC, Lloyds and StanChart, with "areas for further enhancement" for six lenders though all of the UK banks looked at passed the test overall.
HSBC was told to take steps to improve the resolvability of its international infrastructure across 64 countries and territories.
“The changes that would be required to this infrastructure to support certain restructuring actions, which may be needed in resolution, would be complex,” the bank said, adding that the work would be done over a “multiyear period”.
Russ Mould, investment director at AJ Bell, said: “With a gloomy near-term economic outlook, the resolvability test will provide some relief that the UK’s key financial players wouldn’t cause a disaster if something went very badly wrong.
“It’s important to recognise this test wasn’t carried about because of ‘live’ fears. It is more a case of good practice and guarding against a repeat of the global financial crisis in which some banks got into trouble and had to be bailed out using taxpayers’ money.
Share prices moved a little on the news, HSBC Holdings PLC (LSE:HSBA) is the biggest faller, down 1.3%, followed by Standard Chartered, Barclays, Lloyds and Natwest, all down less than 1%.
Dave Ramsden, deputy governor for markets and banking at the Bank of England, said: “Safely resolving a large bank will always be a complex challenge so it’s important that both we and the major banks continue to prioritise work on this issue.”