Who we are and what we do

Managing the failure of a bank, building society or central counterparty

In this section

We are the UK's resolution authority

Resolution is how we manage the failure of a bank, building society or central counterparty (CCP). We collectively call these institutions "firms". The aim is to make sure the failure of any of these entities does not cause major problems for customers, the financial system and public finances.

What we do if a bank or building society fails

We consider a firm to have failed when, put simply, they do not have enough money to pay back those who have lent to them (creditors), or who have deposited money with them (depositors).

In this situation, most firms in the UK would be put into modified insolvency – in other words, closed down or liquidated while selling remaining assets. Eligible customers or depositors either would receive compensation from the Financial Services Compensation Scheme (FSCS) within seven days, or have their accounts moved to another firm. 

The FSCS protects eligible deposits up to £120,000. It can be more, eg if you have just sold a house. 

However, the largest or most complex firms could not go into insolvency. We resolve them instead of shutting them down to protect the UK's financial system. Resolution is a structured process that keeps a failed firm’s key services running to avoid widespread economic disruption. 

In these cases, some people may lose money, but it will be shareholders and certain creditors – not the taxpayer. 

There are many ways that shutting down large firms could damage the economy. For example:

  • they are often connected with other firms, eg through money they owe each other and shared systems, so it could start a chain reaction of failures
  • it would cause disruption for too many people if their operations shut down
  • loss of confidence in the banking system could lead to bank runs – where customers rush to withdraw their money and banks do not have enough physical cash to meet those demands

Why we need a resolution regime

In 2008, banks in many countries were in financial distress. Governments – including our own – felt they had no choice but to bail them out. If a large bank had failed, it would have caused serious problems for many people, businesses and public services. These banks were considered 'too big to fail'.

After the financial crisis, the UK took action so there would be better options if a large bank were to fail in the future. The UK established a framework for resolution (known as the 'resolution regime') in the Banking Act 2009.

The UK's regime has been improved and expanded so it remains fit for purpose. It is consistent with international standards for resolution regimes.

We are the UK's resolution authority. Resolving a major bank will always be hard to execute but we work with them to make sure they are prepared and that we can carry out our plans if they fail. Since 2009, we have used the resolution regime for three firm failures. You can read more on the Past resolution actions page.

We use the Resolvability Assessment Framework (RAF) to assess whether banks operating in the UK are prepared for resolution. The RAF makes the regime more transparent by setting out the outcomes we require banks to achieve in a resolution. The largest banks in the UK must also publish information about their preparations for resolution. And the Bank, as the UK's resolution authority, also publishes its own resolvability assessment of each of the major banks. We published the latest resolvability assessment of the major UK banks on 6 August 2024.

Types of firms it covers

The regime applies to banks and building societies. On this page we refer to them as 'firms'.

The resolution regime does not apply to credit unions. When a credit union fails, depositors are compensated by the FSCS up to £120,000 per depositor per credit union.

The UK also has a resolution regime for  (CCPs). An enhanced CCP resolution regime came into effect on 31 December 2023. This provides us with resolution tools that reflect CCPs' specific risks and characteristics.

Who we work with

We work closely with the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). They work to ensure firms are safe and sound, and fair to customers.

The PRA is part of the Bank of England. We have published a statement to explain how our resolution and supervision responsibilities are divided.

The FSCS protects eligible customers of authorised financial services firms that have failed. We work with them, particularly when we have concerns that a firm is at risk of failure and when firms fail, to ensure that those eligible depositors are protected. 

We also work with the Treasury. You can read our Memorandum of Understanding with the Treasury, which documents the way we work with them. The Treasury also has a Special Resolution Regime Code of Practice. This provides guidance on how and in what circumstances the authorities will use the special resolution tools, which we have regard to in our operation of the regime.

The UK is a global financial centre, home to British and international banks. We work closely with international regulators to ensure we could manage the failure of a British firm with operations overseas. We also support regulators in other countries should they face the failure of a foreign firm that operates in the UK. 

FAQs

  • We are responsible for planning for and executing a resolution.

    We plan for the resolution of every bank, building society and some investment firms in the UK.

    A resolution plan has two main parts. First, a 'preferred resolution strategy', which identifies the tools we would use to resolve the firm. Second, a 'resolvability assessment', which identifies what may make it difficult for us to do that.

    Many firms have parts of their business that make a resolution difficult. We highlight these and require firms to address them. We design our approach to be proportional. So, large or complex firms have greater requirements. This is because they are harder to resolve and it would be more disruptive to the economy if they failed in a disorderly way.

    The PRA decides if a firm is failing, or likely to fail, after talking to us. In the case of investment firms, the FCA would decide. We then consult the PRA, the FCA and HM Treasury before we judge that a firm needs to enter resolution.

    If a firm fails, we are responsible forcarrying out the resolution.

    The Banking Act 2009 sets objectives we must meet.

    These are to:

    • make sure banking services and other functions provided by firms that are critical to the economy remain available
    • protect and enhance financial stability
    • protect and enhance public confidence in the financial system's stability
    • protect public funds
    • protect depositors and investors covered by the FSCS
    • protect (where relevant) client assets
    • avoid interfering in property rights

    HM Treasury gives guidance on how and when the authorities (the Bank, PRA, FCA,  FSCS and HM Treasury) will use the regime in theirspecial resolution regime code of practice.

    It is slightly different process for a CCP. In the Bank of England’s role as the CCP’s supervisor, we would decide if the CCP was failing or likely to fail. Then, in the Bank of England’s role as the resolution authority, we would decide if it were reasonably likely that action could be taken that would result in the CCP no longer failing or being likely to fail, after consulting HMT.

  • We develop a resolution plan for each bank, building society and certain investment firms in the UK. Each plan sets out the actions we would take if a firm failed. For the majority, the plan is to allow them to enter insolvency and rely on FSCS protection.

    We set the preferred resolution strategy for each firm. This depends on things such as how much harm its failure would cause to the wider economy and what kind of structure it has.

    The three main strategies are:

    Bail-in

     The largest UK firms have a resolution strategy that involves the use of the bail-in tool.

    Bail-in enables a firm to be recapitalised by its own investors without the need, over a short period, to find a buyer for its business or to have to split up its operations.

    The Bank has published an operational guide that provides practical information on the ways in which the Bank of England might execute a bail-in resolution, and in particular the operational processes and arrangements that may be involved.

    Transfer 

    A transfer of the firm or of all or part of its business may be appropriate for smaller and medium-sized firms. These firms could have a credible private sector buyer, and a simpler business model that would allow for parts of the business to be broken up if only part of the business was purchased. 

    The firm is sold immediately or after a short period. If it takes a short period, functions that are critical to the firm’s operation would be transferred to a temporary ‘bridge bank’ controlled by the Bank, before being sold on.

    The Bank has published an operational guide that provides practical information on the ways in which the Bank of England might execute a transfer to a private sector purchaser or a bridge bank, and in particular the operational processes and arrangements that may be involved. 

    Modified insolvency

    This strategy would be used for most firms with less than £25 billion in assets where the Bank judges that putting them into insolvency wouldn’t cause disruption to the wider UK financial system. In its judgement, the Bank considers the types of services the firm provides and to whom it provides them to.

    The firm would enter a form of insolvency. The FSCS would compensate eligible depositors up to £120,000 or fund a transfer of their accounts to another firm.

    We have tools to implement these strategies. Find more details in the Bank of England’s approach to resolution.

    It is slightly different process for a CCP. In the Bank of England’s role as the CCP’s supervisor, we would decide if the CCP was failing or likely to fail. Then, in the Bank of England’s role as the resolution authority, we would decide if it were reasonably likely that action could be taken that would result in the CCP no longer failing or being likely to fail, after consulting HMT.

Back to top

This page was last updated 13 April 2026