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UK banks must do more than stress tests to regain confidence: Bank of England
[LONDON] Banks in Britain need to do more than pass health checks on their ability to withstand financial shocks, the Bank of England said, urging boards to improve the way their companies are run.
The BoE also said that top bankers and other senior executives in the financial services industry needed to get more involved in preventing the risk of cyber-attack.
Last week, the BoE said Britain's biggest lenders, with the exception of the Co-operative Bank, had passed so-called stress tests of how well prepared they were for potentially extreme financial scenarios.
On Monday, minutes of the most recent meeting of the Bank's Financial Policy Committee showed policy-makers wanted banks to face up to the challenges of changing rules for the sector. "In this environment, the Committee judged that strong, effective and well-informed management and governance arrangements would be essential to rebuild confidence in the banking system," the minutes said.
British banks have been hit by a wave of scandals ranging from attempts to fix benchmark interest and foreign exchange rates to the mis-selling of loan insurance and complex hedging products to small businesses.
The first of the annual stress tests by the BoE, the results of which were published last week, had shown a number of areas where banks' own testing and capital plans needed to be strengthened, the FPC also said.
Separately, the Committee said banks needed to discuss at the most senior levels the risk of cyber-attacks by hackers.
Assessments carried out by banks had not revealed critical shortcomings but regulators noted some areas for improvement.
These included "a tendency among firms to view cyber threats as a technical problem rather than an issue which merits board-level attention given the evolving nature of cyber threats and the key importance of cyber resilience to continuity of financial services," it said.
Core banks and financial market infrastructure firms should undertake a voluntary resilience test, known as CBEST, as soon as possible, the FPC minutes said.
The Committee said it would review progress in the second quarter of 2015.