Can you stop a bank from going bust?

People rely on banks in their day to day lives, whether it’s for looking after their money or helping them pay for things.

Not surprisingly, then, if banks stopped working, the entire economy would grind to a halt. It’s the Bank of England’s job to make sure that banks (and the entire financial system) continue to work in a safe and sound way.

As part of this, we put a lot of effort into reducing the chances of a bank getting into financial difficulty in the first place.

But it is not possible to prevent all banks from ever failing.

Just like any other type of business, it is important that a bank that doesn’t make a profit is able to fail.

Who pays the price when a bank goes bust?

What happens when a bank fails today?

Things are very different today.

We have been given new powers to step in if a bank fails. We also work with banks to create ‘living wills’ to show how they could be dealt with if they suffered a catastrophic shock.

So if a large commercial bank did go bust today, it could now do so in an orderly way. The losses would fall on the bank’s investors, not taxpayers. And if your bank failed, you could claim back up to £85,000 of your money through the Financial Services Compensation Scheme.

The new rules are designed so that even the biggest, most complex banks can fail if they become unprofitable – but they can do this without the need for taxpayer support and without causing disruption to the financial system or wider economy.

Find out more

• Keeping banks safe
• Will there be another financial crisis?