Bank / Credit Union

Bank of England considers plan to force foreign banks to set up subsidiaries

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July 5, 2023

The central Bank of England is considering a plan that would require international banks to set up subsidiaries instead of branches in the U.K. With this requirement, regulators could seize failing banks within the country, such as the Silicon Valley Bank subsidiary in London, according to a report by Financial Times.

This move would be controversial as subsidiaries are more expensive to maintain than branches. Currently, the Bank of England simply suggests that banks with $127 million of retail and small business transactional deposits set up a subsidiary.

Giles French, chief executive of the Association of Foreign Banks, said this move should be "carefully assessed, so it doesn't deter international banks from operating in the U.K. and providing essential liquidity and capital."

Moving in this direction would also run against the U.K. government's attempt to make U.K. financial services more competitive.

This entire discussion was sparked by the collapse of SVB in March, which prompted the bank to review its practices. SVB's London location became a subsidiary six months prior to its parent's collapse.