The Financial Services Authority (FSA) will not be able to handle an influx of "living wills" next year, according to the British Bankers' Association (BBA).
Every bank and deposit taking financial institution in the UK has to have a draft recovery and resolution plan (RRP) with the FSA by June. This will show how they could be saved or wound down in a crisis.
However, Simon Hills, the executive director of the prudential capital and risk team at the BBA, warned that the FSA does not have enough staff to assess what could be as many as 200 RRPs.
He said: "One of the concerns of the small banks is that it does an RRP and plonks it on an [FSA] supervisor desk and then finds that the FSA isn't resourced sufficiently to look at the plans. I can't see how they are going to manage."
The smaller banks would almost certainly have to bear the costs if the FSA has to outsource the work.