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Home > Financial Stability > Aims and objectives
 

Aims and objectives

​Aims and objectives  |  Key features of the resolution regime  |  Tools available within the resolution regime  |  Legislative framework for the UK resolution regime

A core feature of a stable financial system is that firms must be able to fail in an orderly fashion – that is without excessive disruption to the financial system, without avoidable interruption to the critical economic functions that these firms provide, and without exposing taxpayers to losses. This principle underpins the Financial Stability Board’s international standard for effective resolution regimes (the Key Attributes), agreed by G20 leaders in 2011.  The arrangements for the resolution of failing banks, building societies and investment firms in the United Kingdom are designed to comply with the Key Attributes.

If a firm within scope of the resolution regime fails, the Bank will aim to ensure that the adverse effects of that failure are minimised, for example so that:

  • access to deposits protected by the Financial Services Compensation Scheme (FSCS) is maintained: around £1.1trn of retail deposits are held by individuals at banks and building societies, the majority of which are likely to be protected by FSCS;
  • customer payments continue to flow: in the UK, payments of around £300bn are transferred each day through banks on behalf of retail and business customers, for example to complete house purchases and to pay salaries and bills;
  • credit and other critical functions continue to be provided to the wider economy; and
  • the risk of disorderly ‘fire-sales’ of the firm’s assets, or termination of its derivatives contracts, is minimised.
 
Because the resolution regime grants the Bank powers to affect the property rights of shareholders, creditors and counterparties, the Act sets out the objectives which the Bank must have regard to when resolving a firm. These are to:
 
  • ensure the continuity of banking services in the United Kingdom and of critical functions;
  • protect and enhance the stability of the financial system of the United Kingdom;
  • protect and enhance public confidence in the stability of the financial system of the United Kingdom;
  • protect public funds, including by minimising reliance on extraordinary public financial support;
  • protect depositors and investors covered by the UK financial services compensation scheme (FSCS);
  • protect, where relevant, client assets; and
  • avoid interfering in property rights, in contravention of the European Court of Human Rights.
 
The Bank must consider each of these objectives when choosing which tools to use and in resolving a firm, but they are not ranked in any particular order. 
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