SKN | Banking Fragmentation Is Rising: What UK Coal Finance and Basel’s Warning Mean for HNW Wealth

Key Takeaways:

• UK banks increased coal financing between 2022 and 2025 even as EU banks substantially reduced their exposure, highlighting a widening divergence in banking policies across jurisdictions.
• Barclays and HSBC were major contributors to the UK increase, illustrating how a bank’s public sustainability commitments can coexist with continued financing of higher-risk sectors.
• Basel Committee Chair Erik Thedéen has warned that fragmentation among banking supervisors could weaken information-sharing, encourage regulatory arbitrage and make cross-border risks harder to manage.
• For HNW families, banking diversification should increasingly consider regulatory philosophy, risk culture and jurisdictional exposure — not simply the number of institutions holding assets.

Two developments in the international banking system deserve to be read together. UK banks have increased financing to the coal industry while banks headquartered in the European Union have moved in the opposite direction. At the same time, the chair of the Basel Committee on Banking Supervision has warned that growing fragmentation between national supervisors could make cross-border risks harder to identify and contain. For HNW families, the significance is broader than environmental policy: the assumptions behind a bank’s risk appetite are becoming increasingly jurisdiction-specific.

Stop Treating Bank Policies as Globally Uniform

Recent industry data shows UK bank financing to the coal sector increased 17% between 2022 and 2025, reaching approximately $2.28 billion. Barclays accounted for much of the increase, with its annual coal financing rising 34% to about $1.6 billion, while HSBC’s financing more than doubled to approximately $414 million.

By contrast, coal financing by EU-headquartered banks fell 46% over the same period. The divergence demonstrates an important point for international clients: two banks operating in broadly similar markets can face materially different policy incentives, supervisory expectations and sector risk appetites.

Use Sector Exposure as a Window Into Risk Culture

Coal financing is not, by itself, evidence of a weak bank. Barclays and HSBC both maintain policies designed to reduce or ultimately phase out thermal-coal exposure, although their approaches differ and financing can include companies undergoing broader energy transitions.

The more useful HNW question is how a bank defines and manages controversial or structurally declining sectors. Does it distinguish transition finance from unrestricted exposure? How does its credit committee assess stranded-asset risk? How quickly can its policies change? And does the bank’s approach align with the family’s own reputational and legacy requirements?

These questions belong in counterparty due diligence alongside capital ratios and liquidity.

Take Basel’s Fragmentation Warning Seriously

The regulatory issue is potentially more consequential. Basel Committee Chair Erik Thedéen has warned that declining international supervisory cooperation could create information gaps and encourage regulatory arbitrage, particularly as financial risks become increasingly interconnected.

For globally mobile families, this means the same transaction or exposure can be viewed differently by banks operating under different supervisory environments. Regulatory fragmentation can influence onboarding, credit appetite, collateral requirements, reporting obligations and the treatment of cross-border clients.

Make Swiss Banking the Governance Layer

This is where a Zurich or Geneva private-bank relationship can play a strategic role. The objective is not to isolate the family from international banks, but to prevent one jurisdiction’s regulatory or commercial preferences from controlling the entire wealth structure.

A UK institution may remain appropriate for sterling liquidity, operating companies and UK property. A European commercial bank may provide euro financing or local corporate services. Strategic custody, international liquidity, Lombard financing and succession planning can sit within a separate Swiss relationship.

This creates functional diversification: each institution has a defined role, while the family retains an independent layer for strategic wealth governance.

Stress-Test Regulatory Divergence Before It Becomes Operational

Families should identify where differences in bank policies could create friction. Review which institutions hold strategic cash, provide credit, custody securities, process international payments and finance businesses in sensitive sectors. Then test what happens if one bank tightens its sector policy, changes its risk appetite or introduces additional cross-border controls.

The deeper lesson is that counterparty risk is no longer purely a question of balance-sheet strength. It increasingly includes regulatory jurisdiction, institutional risk culture and policy direction. As international banking becomes more fragmented, the most resilient wealth structures will be those designed so that a change in one bank’s interpretation of risk does not dictate the family’s financial choices elsewhere.

For a confidential discussion regarding your banking counterparties, Swiss wealth architecture, cross-border liquidity and regulatory-risk diversification, contact our senior advisory team.