Maintaining a fit for purpose resolution regime

1: Introduction

The Bank of England (the Bank), in its capacity as the UK’s resolution authority, is responsible for managing the failure of banks and building societies (together ‘firms’) – a process known as ‘resolution’. The resolution process is designed to reduce risks to depositors, the financial system, and public funds that could arise due to the failure of a firm. The Bank works together with the Prudential Regulation Authority (PRA), HM Treasury and the other financial authorities to maintain the resolution regime.

This page summarises the various updates the Bank and PRA are making or are proposing to the resolution regime, following the consultation on MREL the Bank published in October 2024. The Bank thanks all respondents to that consultation for their detailed and considered responses and active engagement during the consultation period. Based on the feedback we received, the Bank has made changes to its initial proposals to ensure the regime provides a robust and proportionate foundation for managing firm failures.

15 July publications

• The publications include:

  • The Bank’s final policy in relation to setting the Minimum Requirement for Own Funds and Eligible Liabilities (MREL). MREL is a requirement for firms to maintain a minimum level of equity and eligible debt. This is our third substantive update to the MREL framework since 2016, demonstrating the importance of maintaining the resolution regime in response to developments. The policy is effective from 1 January 2026.
  • The PRA’s consultation on increasing the Resolution Assessment threshold under the Resolution Assessment Framework (RAF) from £50 billion in retail deposits to £100 billion in retail deposits. This will ensure only the very largest and most complex firms will need to report and disclose their preparations for resolution.
  • A PRA consultation on amendments to its MREL reporting to reflect the MREL policy changes.
  • A PRA consultation on proposed revisions to its MREL disclosure requirements, as part of wider changes to Pillar 3 disclosure.

  HM Treasury is making several statutory instruments relating to resolution, which the Bank has considered in finalising its MREL policy statement.

The publications reflect the Bank’s judgement on the calibration of the resolution regime. They take into account the Bank’s experience of resolving Silicon Valley Bank UK (SVB UK) in March 2023 as well as market and regulatory developments. Those developments include Parliament legislating to support smaller firm resolution by giving the Bank access to an industry-funded recapitalisation safety net.^{footnote [1]}

The changes and proposed changes aim to balance, on the one hand, the value of a proportionate regime that fosters growth, innovation and competition by recognising the lower risks that smaller and less complex firms generally present to the UK’s financial stability. And, on the other, they reflect the need for greater capabilities and assurance over resolvability as complexity, size and risk in a firm grows.

The Bank has consulted HM Treasury in finalising its MREL policy. HM Treasury has confirmed that it considers the Bank’s revised MREL policy ensures that requirements on growing firms are proportionate and support their growth, while managing financial stability risks.

While the changes reflect an evolution in certain aspects of the resolution regime the fundamental structure remains unchanged. Key detail is available in the Bank’s approach to resolution and ensuring resolvability. The statements in this document are intended for general reference purposes, and are not intended to affect the meaning or interpretation of the publications themselves.

Firms should engage with, and understand, the publications relevant to them. The Bank and PRA are available to meet and discuss the publications with firms as needed. Firms should contact their usual Bank and PRA contacts if they have questions. Responses to the PRA consultations will assist the Bank and PRA to finalise the proposals so the regime continues to provide a robust but proportionate framework.

2: The Bank’s approach to setting MREL and preferred resolution strategies

To be ready for the possible resolution of a firm, the Bank is required to identify a preferred resolution strategy and develop a resolution plan for all firms. The resolution strategy determines the capabilities and MREL that firms are required to maintain in preparation for a potential failure. In determining the feasibility of the resolution strategy, the Bank must not assume the use of public funds to support resolution, which is a decision reserved solely to HM Treasury.

Under the UK resolution framework, the preferred resolution strategies are:

• The largest UK firms have a bail-in resolution strategy where the Bank would use its powers to recapitalise the firm by imposing losses on the firm’s shareholders and certain other investors. The strategy avoids the need to find a buyer for the business or to have to split up its operations over a short period of time, providing continuity. These firms are required to meet MREL above the minimum capital requirements (MCR) they have been set by the PRA.^{footnote [2]} We call these ‘bail-in firms’.
• Under a transfer resolution strategy, the Bank can use its resolution powers to transfer some or all of the firm’s business to a private sector purchaser, or a temporary Bank-owned bridge bank. In the case of a partial transfer, the rest of the firm’s assets and liabilities could be placed into an insolvency process. Associated losses or recapitalisation needs of a transfer may now be covered by the new industry-funded safety net. We call these ‘transfer firms’.
• Under a modified insolvency strategy, smaller firms will be sold or wound down after protected depositors have been compensated by the Financial Services Compensation Scheme (FSCS). The firm’s shareholders, uncovered depositors and unsecured creditors are left to bear the losses. Therefore these firms do not need to hold MREL above MCR. But it must be credible and feasible for these firms to enter insolvency without significant adverse effect on the financial system or similar institutions. We call these ‘modified insolvency firms’.

When setting the preferred resolution strategy for firms, the Bank must therefore keep in mind, whether the potential costs to recapitalise a failed firm should be paid by the firm’s own investors (via MREL) or be mutualised across the industry (via the FSCS).

Under the revised MREL policy published today: the indicative lower threshold beyond which firms are considered too large to be put into modified insolvency has been increased from £15 billion in total assets to £25 billion. Firms with total assets in the range between £25 billion–£40 billion can be set either a transfer or bail-in preferred resolution strategy. The indicative upper threshold above which firms can generally expect to have a preferred bail-in strategy has been increased from £25 billion to £40 billion in total assets. The increase in these thresholds broadly reflect nominal growth over the period since the thresholds were originally set. Starting in 2028, the Bank will update these thresholds every three years as necessary to make sure they keep up with nominal growth.

The upper threshold of £40 billion reflects the challenges of executing an orderly transfer for the largest firms. This includes the potential availability of willing appropriate buyers, and the contingent risks to public funds of effecting a transfer to a private sector purchaser, or a Bank-owned bridge bank using the new industry-funded safety net for a firm of this size. Bail-in firms must meet MREL.

Following today’s updates, transfer firms will no longer be required to meet MREL above MCR, enhancing the proportionality of the resolution regime. This means that a transfer or a modified insolvency firm meeting its MCR is also automatically meeting its MREL requirements and so MREL has no practical effect for such a firm.^{footnote [3]}

In most cases, firms with total assets of fewer than £25 billion can be expected to enter modified insolvency in the event of failure, so do not need to take additional steps to prepare for resolution. The Bank’s calibration of this threshold in part reflects the new industry-funded safety net. This enables the Bank to use the transfer stabilisation power for the resolution of smaller firms if it is needed and in the public interest at the time of their failure.

The Bank recognises that a one-size fits all approach to setting preferred resolution strategies for firms between £25 billion–£40 billion would be inappropriate given the diversity of firms within the UK that fall into this range. Firms within this indicative range should expect to be set a preferred resolution strategy of either transfer or bail-in, depending on the Bank’s assessment of what would be most appropriate to achieve the special resolution objectives.

The Bank considers several factors when deciding whether a transfer or bail-in strategy is most appropriate for firms between £25 billion–£40 billion. The nearer the firm is to the top of the £25 billion–40 billion range, the more likely the Bank will set a bail-in strategy and therefore that the firm will need to hold MREL. The Bank may choose to set a transfer strategy for firms that, among other considerations:

• have a simple asset/liability structure that allows for critical functions to be easily separated and/or restructured in resolution;
• can provide the necessary information to the Bank to support a transfer within the required timeframe;
• have assets and liabilities that are reasonably likely to be attractive to a private sector purchaser;
• are of a size that the number of potential purchasers is reasonably high; or
• the Bank has a reasonable basis for assuming the firm can be resolved using the transfer power (including for this purpose the use of the industry-funded safety net to make a payment in respect of the costs of recapitalisation of the firm) without reliance on public funds to fund the firm’s recapitalisation.

A transfer preferred resolution strategy may also be set in circumstances where the Bank assesses that a firm below the £25 billion threshold would likely pose an unacceptable risk if it entered modified insolvency. This could be due to the cessation of services the firm provides, including to protected and non-protected deposits, or indirectly by negatively affecting confidence in the financial system or similar institutions. The Bank considers the indicative threshold of more than 40,000–80,000 transactional accounts to be an important supervisory intervention point for when a transfer preferred resolution strategy may be needed for such firms. But such a firm will not be required to meet MREL above MCR.

All transfer and bail-in firms need to implement additional capabilities so they are prepared for resolution, with larger and more complex firms expected to do more. Figure 1 sets out a stylised overview of the resolution requirements for firms as they grow, and examples are provided in the annex.

Figure 1: Stylised overview of resolution requirements by firm grouping ^{(a) (b)}

Footnotes

• (a) RAF policies: The Restructuring Planning SoP does not apply to transfer firms.
• (b) Resolution reporting: Includes maintenance of a Phase 1 resolution pack under PRA SS19/13, which applies to all firms, and MREL and COREP13 reporting, which generally applies to stabilisation power firms. More information about PRA SS19/13 is set out below.

Modified insolvency firms forecasting within the next three years to reach the lower £25 billion asset threshold, and/or transactional account threshold, must inform the Bank and the PRA in advance. For these firms, the Bank expects to increase its engagement to provide clarity and support on the implications of a likely future change to a preferred resolution strategy. A change in preferred resolution strategy will not occur until the threshold has been reached. Bail-in firms will then usually have at least six years to meet their end-state MREL, with scope for a flexible add-on of up to two years if circumstances require it. Firms can generally expect to also have a minimum of 18 months to implement additional resolvability requirements, as discussed further below.

As we have seen in practice though, every resolution will be different in terms of the nature of the failing firm, including the context and speed at which it is failing. The failure of SVB UK also showed there may be circumstances where it is in the public interest to use resolution powers notwithstanding that the firm has originally been set a preferred strategy of modified insolvency. For example, there may be circumstances where the Bank decides to transfer a firm with a modified insolvency strategy to a private purchaser or a temporary bridge bank to stabilise the firm, pending an onward sale or wind-down of the business. Therefore, retaining optionality and flexibility within the Bank’s resolution toolkit is pivotal in ensuring the operational readiness of the UK resolution regime.

3: The Bank’s approach to assessing resolvability

Once the Bank has set a preferred resolution strategy, it must assess whether the firm has made the necessary preparations for resolution. The Bank does this via the Resolvability Assessment Framework (RAF). The RAF has three key elements:

• The Bank’s approach to assessing resolvability and the resolvability outcomes^{footnote [4]} bail-in or transfer firms must, as a minimum, achieve to support a resolution if they fail.
• A reporting and disclosure framework requiring the very largest firms to carry out an assessment of their preparations for resolution, periodically to submit a report of that assessment to the PRA and to publish a summary of that report.
• The publication of a statement by the Bank concerning the resolvability of each major firm which makes an assessment. The Bank’s second assessment of the major firms’ resolvability was published in 2024. Our third assessment of the major firms’ resolvability will take place from October 2026, with publication due in mid-2027.

The largest and most complex firms in the UK whose failure could pose the greatest risks to UK financial stability are subject to the full scope of resolvability policies, and the reporting and disclosure requirements. The Bank’s first two assessments of the major UK firms have found substantial progress on resolvability. But maintaining a credible and effective resolution framework is a continuous process. The Bank and PRA have continued to review the RAF since it was introduced to ensure it remains fit for purpose based on experience of operating the framework and wider developments. This has led to two updates to how the RAF applies to the largest and most complex firms:

• a consultation published 15 July 2025 proposing to raise the threshold at which firms come into scope of the reporting and disclosure requirements under the RAF from £50 billion to £100 billion of retail deposits. Updating this threshold by more than indexation to nominal GDP growth will enhance the proportionality of the resolution regime so the burden of reporting and disclosure only applies to the very largest firms. The update also ensures that firms continue to be assessed under the RAF alongside comparable peers. This will maximise the benefits, efficiency and proportionality of future RAF assessments as they will be tailored to peer groups and the risks and considerations they face; and
• changes to the timing of major UK firm RAF assessments, so timings can be adjusted to reflect the circumstances at the time and progress made by firms. The third assessment will start in October 2026 as previously confirmed. The Bank will be engaging major UK firms and wider stakeholders on the planning and design of the third RAF assessment later in 2025 – as the Bank has previously announced, this assessment will be focused on the ‘Continuity and Restructuring’ resolvability outcome. Ahead of the assessment, these firms will continue to maintain their resolvability and ensure their capabilities are ready for use so that progress on resolvability continues.

The RAF applies to smaller and less complex firms proportionately to their size and complexity. Mid-tier firms (transfer or bail-in firms that are not in scope of the RAF reporting and disclosure requirements) are assessed by the Bank on whether they can achieve the resolvability outcomes through bilateral engagement, targeted information requests, and assurance activities. These assessments generally take place no more frequently than every two years, but the Bank will vary its engagement with individual firms depending on the nature of any issues identified and, where appropriate, will look to plan activities out to avoid any disproportionate peaks of work for firms. To be proportionate, mid-tier firms are not subject to the RAF reporting and disclosure requirements and the Bank does not make public disclosures about mid-tier firms’ resolvability. The second assessment of mid-tier firms’ resolvability is underway in 2025 with feedback to firms expected in late 2025.^{footnote [5]}

Transfer firms do less than bail-in firms to prepare for their resolution, as they only need to develop and maintain capabilities designed to support a transfer, with no need to be able to plan for their post-resolution restructuring. Should a firm’s preferred resolution strategy change (or be expected to change) from transfer to bail-in, the Bank will support the firm in understanding the additional capabilities the firm may need to develop as a result.

Modified insolvency firms are not subject to the RAF as they are expected to be wound down, with covered depositors paid out without needing additional capabilities for resolution. The Bank conducts its resolution planning for these firms via information submitted to the PRA for supervisory purposes, including regulatory reporting. The Bank and PRA also work with the FSCS to ensure modified insolvency firms are ready to provide information via ‘Single Customer View’ testing on their eligible deposit and client assets to support compensation payments in the event of insolvency.

4: Regulatory reporting and disclosure

To be prepared for resolution it is important for the authorities to have information to inform decision-making. The PRA and the Bank are working together to streamline resolution reporting requirements for firms where possible. In CP15/25, the PRA is proposing to make targeted changes to the MREL reporting expected from firms. The changes will establish a clear, consistent and consolidated MREL reporting framework and a net reduction in the reporting burden on firms.

With the availability of the industry-funded safety net, and taking into account feedback received, the Bank also intends to increase its engagement with individual modified insolvency firms over time. This engagement will help to inform the point at which it may be appropriate in certain cases for the Bank to set a transfer strategy for a firm with less than £25 billion total assets. This engagement will be supported by the Bank and PRA’s continued work to review and potentially make changes to the content of resolution packs, as set out in PRA supervisory statement SS19/13, and other resolution information requirements.

The Bank will also take this opportunity to consider whether other aspects of transactional banking should be considered in determining a transfer preferred resolution strategy and whether the definition of transactional accounts should be updated in light of this. As part of this work the Bank will be engaging with firms who provide transactional banking as part of its business model. While this work is ongoing, the Bank does not anticipate changing any firm’s preferred resolution strategy from modified insolvency to transfer, on the basis of transactional accounts, before any updates to the transactional account definition.

Finally, the Bank and PRA believe there is a need for clearer information on the adequacy of a firm’s MREL resources. In CP16/25, the PRA proposes to replace existing Pillar 3 disclosure obligations with specific tables on MREL. This will increase market transparency on firms’ MREL compliance and build market confidence in the resolvability of MREL firms, and promote safety and soundness. For proportionality, reduced disclosures will be required by less complex firms. If the PRA proceeds with the proposals in its CP, the Bank intends to consider ceasing to make its current annual publication on firms' MREL because the relevant information would already be in the public domain.

Annex: Illustrative examples of how a firm’s preferred resolution strategy may change as it grows

Table A.1.A: Firm whose preferred resolution strategy changes from modified insolvency to transfer based on total assets indicative threshold

Table A.1.B: Firm whose preferred resolution strategy changes from transfer to bail-in based on total assets indicative threshold

Table A.1.C: Firm whose preferred resolution strategy changes from bail-in to transfer based on total assets indicative threshold