Amendments to the Bank of England’s approach to setting a minimum requirement for own funds and eligible liabilities (MREL)

1: Introduction

The Bank’s overall framework for setting MREL

The Bank aims to maintain a fit for purpose and ready for use resolution regime. The bank failures of 2023 underline the importance of credible resolution arrangements. The Bank’s overall approach to ensuring resolvability supports financial stability through strong, effective and proportionate standards appropriate for the maintenance of a credible resolution regime.

The Bank, as the UK resolution authority, is responsible for taking action to manage the failure of certain regulated financial firms and/or their groups – including UK-headquartered banking groups, UK-incorporated banks and building societies, and certain PRA-designated investment firms – a process known as ‘resolution’. Resolution allows the shareholders and unsecured creditors of failed firms to be fully exposed to losses, while ensuring the critical functions^{footnote [1]} and banking services of the firm can continue thereby helping to protect and enhance financial stability. Resolution reduces risks to depositors, the financial system, and public funds that could arise due to the failure of a firm. By ensuring shareholders and investors are first in line to bear the costs of failure, rather than depositors or public funds, resolution can both reduce the risk of firm failures by supporting market discipline and limit the impact of failure when it does occur.

For each firm in scope of the regime, the Bank sets a preferred resolution strategy, to inform the Bank’s resolution planning for that firm. The firm could be expected to enter into modified insolvency (a ‘modified insolvency firm’) upon failure or, if the use of resolution tools is likely to be appropriate, a stabilisation power preferred resolution strategy may be set. This would be either transfer of part or all of the business to a willing third party purchaser (or, temporarily, to a Bank of England owned bridge bank) (a ‘transfer firm’), or bail-in where the firm is recapitalised by its own investors, followed by business restructuring, to restore the firm to viability (a ‘bail-in firm’). The actual resolution strategy pursued in the event of the firm’s failure may differ from the preferred strategy, depending on what is judged best to serve the public interest in the circumstances.

MREL is a requirement for all firms to maintain a minimum level of equity and eligible debt. Currently for modified insolvency firms and, as explained in this PS, in the future transfer firms also, MREL is set equal to the minimum capital requirement (MCR) set by the PRA.^{footnote [2]} It therefore has no practical impact. For bail-in firms, MRELs are set greater than MCR. (For simplicity, further references to MREL in this PS refer to MREL requirements above MCR.) In 2021, the Bank introduced a six-year flexible glide path, extendible for up to a further two years, to allow firms newly subject to MREL to transition to their end-state MREL requirements.

The purpose of MREL is to help ensure that when firms fail, the resolution authority can use these financial resources to absorb losses and recapitalise the continuing business and support its restructuring. This reduces the likelihood that governments use public funds to rescue failing firms and in effect ‘bail out’ their creditors. During the global financial crisis (GFC) bailouts were the only means of avoiding the negative consequences which firm insolvencies would have had on their depositors, the wider financial system, and the economy as a whole – in other words, the firms were ‘too big to fail’. MREL is therefore a critical element of an effective resolution regime.

Since the publication of the Bank’s consultation, the Bank Resolution (Recapitalisation) Act 2025 (BRRA 25) has received Royal Assent. The BRRA 25 establishes a recapitalisation payment mechanism to support small bank resolution where the exercise of a stabilisation power to achieve a transfer is in the public interest. The mechanism would allow the Bank to use funds provided by the banking sector to cover certain costs associated with resolution. Further information on the mechanism is set out in Box B.

Summary of responses

The Bank’s consultation on amendments to its approach to setting MREL ran from 15 October 2024 to 24 January 2025. The Bank received and considered 26 written responses and also took into account feedback delivered orally, for example at roundtables and supervisory meetings with firms. The detailed themes of the feedback are set out in Section 3. The names of respondents who consented to their names being published are set out in Annex 4.

On how the MREL framework applies to bail-in firms, respondents welcomed the Bank’s proposals to consolidate, simplify and clarify the existing total loss absorbing capacity (TLAC)/MREL framework. For the most part respondents agreed the Bank’s proposals would achieve this outcome without significantly increasing the burden on firms in practice. Some respondents raised concerns about the impact of aspects of the Bank’s proposals on the measurement basis for Eligible Liability Instruments (ELIs), contractual triggers, and legal opinions.

On the indicative thresholds for determining a preferred resolution strategy, and MREL, respondents welcomed the Bank’s proposed indexation of the total assets threshold. However, several respondents called for the extension of the period of indexation back to when the Bank’s MREL policy was introduced. Some respondents urged the Bank to go beyond historical indexation, while others cautioned against this. While most respondents were supportive of the Bank’s proposal to make MREL equal to MCR for transfer firms, others emphasised the importance of maintaining the ‘polluter pays’ principle. Some were disappointed the Bank did not propose changes to the transactional accounts threshold and called for the definition to be changed or for it to be removed or raised. Several respondents also called for greater clarity on how the Bank determines preferred resolution strategies, and MREL, to support their business planning.

Changes to and impact of revised policy

The Bank has considered the feedback provided in response to the consultation paper (CP), and the passage of the BRRA 25. As a result, the Bank has made some changes to the final policy approach that is set out in the revised MREL SoP. The key changes that we have made are explained in Section 2 of this policy statement.

When considering its response and finalising the policy, the Bank has carefully considered the impact of its MREL policy. In particular we have been mindful to ensure it remains proportionate and aligned with international standards. We have made changes and clarifications to some of the initial proposals as a result of the useful feedback received. We consider that the costs to firms of compliance with the MREL policy should be reduced as a result.

The Bank considers that its revised policy approach to setting preferred resolution strategies and MREL continues to provide a robust and proportionate foundation for managing bank and building society failures.

In summary, the Bank has:

• reduced the scope of non-Common Equity Tier 1 (CET1) own funds internal MREL instruments to be subject to its revised policy on contractual triggers;
• introduced a more proportionate approach for firms in relation to the requirement to obtain an independent eligibility legal opinion where the ‘material issuance terms’ relevant to MREL eligibility of an issuance of ELIs are substantially the same as for a previous issuance for which an eligibility legal opinion was obtained;
• altered its approach to indexation of the total assets indicative thresholds, increasing the thresholds to reflect nominal economic growth since MREL was introduced in 2016, resulting in an increase to £25 billion–£40 billion, applicable from January 2026;
• starting in 2028 committed to update the total assets indicative thresholds every three years, if necessary to take account of changes in nominal economic growth;
• introduced changes to the total assets thresholds to provide greater clarity and flexibility on when and whether a transfer or bail-in preferred resolution strategy may be appropriate;
• confirmed it expects to set MREL equal to MCR for transfer firms, with the effect that MREL imposes no additional requirement for loss absorbing capacity, as it is satisfied entirely by the firm meeting its MCR – this means that the indicative transactional accounts threshold will no longer result in MREL;
• clarified the availability of the flexible add-on, of up to two years, for bail-in firms that have reached end-state MREL, in addition to firms that remain on their six-year flexible glide path transitioning to end-state MREL; and
• maintained its other proposals as consulted on, subject to some clarifications that are set out in Section 3.

Implementation

In its CP, the Bank proposed to make the majority of its proposals effective from 1 January 2026, with a small number of proposals to be effective earlier than that and soon after the policy was finalised. To support firms in taking a coherent overall approach to implementing the revised policy the Bank has decided to move to a single implementation date of 1 January 2026. The revised MREL SoP will apply from 1 January 2026.

HM Treasury (HMT) has previously confirmed its intention to make several statutory instruments relating to resolution, which the Bank has considered in finalising its policy. Changes necessary to enable the Bank’s final policy will also be effective on this date. They are summarised in Table A.

Consultation with HM Treasury

Consistent with the Memorandum of Understanding between the Bank and HMT on Resolution Planning and Financial Crisis Management, in finalising its MREL policy the Bank has consulted HMT. HMT 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.

Associated changes

The Bank has worked closely with the PRA on the finalisation of its revised MREL policy. Alongside this PS, the PRA has published consultations covering amendments to its MREL reporting (CP15/25 – Resolution planning: Amendments to MREL reporting) and, as part of wider changes to Pillar 3 disclosure, MREL disclosure requirements (CP16/25 – Disclosure: resolvability resources, capital distribution constraints and the basis for firm Pillar 3 disclosure).

The PRA and the Bank are working together to streamline resolution reporting requirements for firms where possible. To this end, the Bank confirms its intention to consult on changes to COREP13 reporting requirements. Along with other proposals, the changes may lead to a deletion of four COREP13 templates which contain information on own funds instruments and liabilities.^{footnote [3]}

2: Summary of changes to policy

UK CRR TLAC provisions and other related changes

The Bank received support for the simplification of the UK MREL regime from most respondents. There were several requests for clarification of technical points in the final MREL SoP and these are covered in Section 3. The policy proposals will be implemented as consulted save as described below. A final destination table for relevant provisions can be found in Annex 3.

Figure 1: Key elements of the MREL legislative and regulatory framework from 2026

Footnotes

• Notes: The policy sources above contain both firm and regulator-facing requirements. The list is not exhaustive: for example, parts of the PRA Rulebook and PRA supervisory statements continue to be relevant to firms in complying with the MREL framework.

Contractual triggers for internal MREL instruments

The Bank has considered carefully all the responses to its proposal on contractual triggers for internal MREL instruments and the Bank’s final policy directly addresses the points most frequently raised. The feedback received is summarised in Section 3.

The Bank considers that contractual triggers play an important role in ensuring that internal MREL debt instruments can be used to absorb losses and recapitalise UK material subsidiaries in a way that supports the resolution strategy. Use of the Bank’s statutory powers to achieve loss absorption and recapitalisation of the subsidiary, alongside the exercise of statutory powers on the parent resolution entity in the UK or abroad, introduces unnecessary complexity and risk at operating subsidiary level. The inclusion of contractual triggers overcomes this issue. In addition, contractual triggers encourage co-ordination between resolution authorities for cross-border groups, through inviting the home authority’s consent to trigger the instrument without using resolution tools, consistent with the Financial Stability Board’s (FSB) TLAC standard.

As highlighted by some respondents, the contractual trigger provides for the write-down and/or conversion of internal MREL instruments, when a resolution entity in the group is subject to resolution proceedings – even if the subsidiary is not yet failing or likely to fail and unable to recover. Having the ability to strengthen the capital position of a material subsidiary in these circumstances would not crystalise any additional losses for the subsidiary or the group as a whole. It enables the Bank to direct a change in the form of some of the instruments from debt liabilities to equity at the subsidiary. The ability to co-ordinate this further capitalisation of material subsidiaries in this way may help to sustain greater market confidence following resolution.

Firms should also note that contractual triggers in UK-hosted entities support the UK’s preferred approach to valuations in the context of overseas-led resolutions. The UK has set out its general intention to leverage home authority-led valuation analysis to inform its assessment of the recapitalisation need in the UK. The contractual triggers reduce the possibility of needing to perform a UKTS-compliant valuation, which would be required if the Bank deployed its Banking Act 2009 (Banking Act) mandatory write-down powers (ie in the absence of contractual triggers).

In light of the feedback from the industry, the Bank is finalising the policy on contractual triggers with two significant amendments to the proposal consulted on, while maintaining the substance of our original proposal that the treatment of internal ELIs and non-CET1 own funds instruments in this respect should be aligned.

First, we will not generally expect firms to include contractual triggers in non-CET1 own funds instruments or ELIs issued by non-UK material subsidiaries and other non-UK entities. Exceptionally, the Bank may stipulate the inclusion of contractual triggers when using its discretion under the MREL SoP to propose an internal MREL for non-UK material subsidiaries of UK firms where the host authority has not published MREL-equivalent regulations or regulatory proposals. The ‘impracticability exception’ consulted on will, therefore, be limited to that situation.

Secondly, the entire ‘back-book’ of internal Additional Tier 1 (AT1) and Tier 2 instruments in issue prior to 1 January 2026 will be permanently exempted from the requirement to include contractual triggers.^{footnote [4]} In respect of such AT1 and Tier 2 instruments in issue prior to that date, the existing policy remains in place whereby firms should consider whether the absence of contractual triggers could create difficulties for resolution.

Generally reducing the scope of the requirement for contractual triggers to instruments newly issued by UK entities will reduce the impact of the policy on UK firms with an international presence, freeing them from the need to negotiate with host regulators the inclusion of additional contractual terms.

In addition, in order to enhance the effectiveness of the policy, the revised MREL SoP states that firms’ legal documents should be drafted to ensure that any direction of the Bank to write down or convert liabilities should be made legally binding on the instrument parties and legally enforceable by the Bank, to avoid an outcome where the Bank can ‘direct’ but not legally compel the write-down or conversion without using statutory mandatory reduction or stabilisation powers.

Updates to the Bank’s indicative thresholds for setting a stabilisation power preferred resolution strategy

Level of the total assets indicative threshold

The Bank had proposed to increase the total assets indicative threshold from £15 billion–£25 billion to £20 billion–£30 billion to account for recent higher nominal UK economic growth. This indexation of the threshold was informed by nominal growth over the period from 2022, when the MREL policy was last reviewed, to end-2023, the most recent full year of data available at the time of the consultation publication.

Several respondents to the consultation suggested that the indexation period should be increased to include the period from when the thresholds were first set in 2016, and to a date later than end-2023. Some respondents also suggested reflecting anticipated future nominal economic growth in the indexation. Some respondents called for the total assets threshold to be increased significantly beyond levels implied by indexation alone.

Having taken this feedback into account, the Bank has revised its approach to index from 2016, when the MREL policy was first introduced, to end-2024, the most recent full year of data. This would imply a range of around £23 billion–£38 billion. In revising the thresholds, the Bank has chosen to go further and anticipate some future nominal economic growth by rounding up the indicative thresholds range to £25 billion–£40 billion, with effect from January 2026.

The Bank’s expectation in the consultation was that it would keep the threshold under review, but it did not expect to update it frequently. Several respondents called for the Bank to be clearer, and some called for a commitment to periodic future increases to reflect inflation. The Bank recognises the importance of keeping the thresholds up to date and expects to update the thresholds every three years, as necessary to take account of changes in nominal economic growth. The first such update would be due in 2028 H1, to take account of the impact of nominal economic growth between end-2024 and end-2027.

Any future changes to the thresholds driven specifically by such indexation updates would not be subject to any further public consultation. When updating the thresholds in this way, the Bank will take into account consistency with methodologies used to update other Bank/PRA regulatory thresholds, and the indicative nature of the thresholds range.

Approach to determining a firm’s preferred resolution strategy for firms above £25 billion in total assets

The Bank has provided a summary of its approach to setting preferred resolution strategies here, with further explanation of the changes to its policy described below.

Under a modified insolvency strategy, the firm’s business and assets are sold or wound up after protected depositors have been paid by the Financial Services Compensation Scheme (FSCS), or had their account transferred by the liquidator to another institution using FSCS funds. The proceeds of this liquidation are paid to creditors on their claims in the order that applies under an ordinary corporate liquidation, after the costs of the insolvency process have been deducted.

Under a transfer preferred resolution strategy, the entire firm, or part of its business is transferred to a private sector purchaser or, if necessary, a Bank of England-owned temporary bridge bank. Transfer may be a credible and feasible resolution strategy for smaller and medium-sized firms that meet the public interest test for use of stabilisation tools. The recapitalisation payment mechanism introduced by the BRRA 25 (the ‘recapitalisation payment mechanism’) may only be used to effect the recapitalisation of a firm that is transferred to a private sector purchaser or a Bank of England-owned bridge bank. Regulatory capital instruments would be written down and/or converted to equity on entry to the special resolution regime, prior to the exercise of transfer powers.

Bail-in enables a firm to be recapitalised through the conversion of eligible debt to equity (in addition to the write down or conversion of capital instruments) without the need to find a buyer for its business or to have to split up its operations over a short period. The recapitalisation payment mechanism may not be used to recapitalise a firm through a bail-in without any transfer to a private sector purchaser or Bank of England-owned bridge bank.

Some respondents suggested the introduction of the recapitalisation payment mechanism could mean the Bank could significantly increase its total assets threshold, beyond indexation. Others disagreed, citing a risk of moral hazard of using industry funds to recapitalise banks that should be required to ‘self-insure’ against the risk of their own failure by being subject to MREL.

Taking this feedback, and the passage of the BRRA 25, into account, the Bank has decided to alter its framework for setting preferred resolution strategies for firms within the revised total assets thresholds range of £25 billion to £40 billion. Firms within that range can expect to be set a stabilisation power preferred resolution strategy (transfer or bail-in). Whether the preferred resolution strategy is transfer or bail-in will depend on relevant factors, including the technical feasibility of executing an orderly transfer, 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 of England-owned bridge bank using the new mechanism. These factors are set out in MREL SoP paragraph 4.7.

In drawing up the firm’s resolution plan the Bank must not assume the receipt of any extraordinary public financial support. This supports the special resolution objective to protect public funds in the instance of a firm’s failure. In this context, the Bank will bear in mind the risk the FSCS may be required to request a loan from the National Loans Fund if the amount it requires to recapitalise a firm through the recapitalisation payment mechanism, exceeds the amount it may levy the wider industry in a given year, and the overall potential costs to industry of use of the mechanism. Consistent with the Bank’s approach to setting MREL for bail-in preferred resolution strategy firms, the Bank will generally assume that recapitalisation capacity needs to be sufficient to cover a firm’s MCR.

In general, for larger firms there are greater risks to the technical feasibility of executing an orderly transfer, the potential availability of willing appropriate buyers, and to the contingent risks to public funds. As such, 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. Above the upper threshold the Bank’s policy remains that a bail-in preferred resolution strategy is likely to be appropriate. In exceptional circumstances it might be possible for firms that are growing beyond the upper threshold but with specialist business models that do not involve material maturity transformation or credit intermediation to maintain a transfer preferred strategy for longer.

Transfer preferred resolution strategies for firms below £25 billion total assets

For firms below £25 billion total assets, the Bank will determine whether a modified insolvency or a transfer preferred resolution strategy is appropriate. The Bank’s existing indicative 40,000 to 80,000 transactional accounts threshold (accounts from which withdrawals have been made nine or more times within a three-month period) supports preferred resolution strategy setting for these firms, as an indicator of the potential impact from discontinuity in the provision of certain firms’ banking services. Its aim is to ensure that smaller firms below the total assets threshold which large numbers of customers rely on for their day-to-day banking services have adequate capabilities to be resolved through a transfer to a private sector purchaser.

Respondents suggested the Bank raise or remove the transactional accounts threshold, noting the FSCS digital payments portal and changes in consumer banking behaviour. Respondents also suggested the Bank revise the transactional accounts threshold definition, suggesting that it is too broad, does not reflect changes in consumer banking behaviour, and captures non-primary and savings accounts.

The Bank recognises that there have been changes in consumer banking behaviour and banking products since the threshold was implemented in 2016, although the extent to which a firm provides accounts on which large numbers of people or organisations rely for day-to-day transactions remains an important factor in setting resolution strategies.

In most cases, firms with total assets of less than £25 billion can be expected to enter modified insolvency upon failure and therefore do not need to meet MREL or maintain additional capabilities to prepare for their failure. A transfer strategy may nevertheless be set in circumstances where the Bank assesses that a firm below £25 billion total assets would pose an unacceptable risk if it entered modified insolvency. 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 strategy may be needed for such firms. But such a firm will not be required to meet MREL above MCR.

With the availability of the recapitalisation payment mechanism under the BRRA 25, 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.

Additionally, as the case of Silicon Valley Bank UK (SVB UK) showed, there may be cases where the actual failure of a small firm does meet the public interest test for the use of stabilisation powers notwithstanding the preferred strategy that had been set. This underlines the importance of the Bank, as UK resolution authority, and firms having access to the right information, available at the right time, to plan for or execute the resolution of a small firm if needed.

Consistently with this, the Bank does not expect to set MREL for small domestic deposit takers (SDDTs) or SDDT consolidation entities.^{footnote [5]}

Implications of a transfer preferred strategy for MREL and Resolvability Assessment Framework (RAF) capabilities

The Bank proposed in its consultation that MREL would generally be set equal to MCR for transfer firms. This proposal was made having considered the Bank Resolution (Recapitalisation) Bill, which has since received Royal Assent and become the BRRA 25. Where additional loss absorbing capacity is required in resolution for these firms, after having written down regulatory capital, and in the absence of a purchaser willing to make a sufficient capital contribution, the Bank proposed that this would, where needed, be met through the recapitalisation payment mechanism under the BRRA 25.

As set out in Section 3, many respondents supported this proposal as a proportionate step, although others emphasised the importance of the ‘polluter pays’ principle being maintained. One respondent also sought clarification on whether there could be circumstances when MREL would be set above MCR for a transfer firm. Having considered the feedback provided, and having consulted HMT, the Bank has maintained the policy proposal not to set MREL above MCR for transfer firms, including those set a transfer strategy in the £25 billion–£40 billion range. This is on the basis the recapitalisation payment mechanism provides a backstop for recapitalising a failed bank upon transfer to a private sector purchaser or a Bank of England-owned bridge bank.

It is important the Bank only relies on the recapitalisation payment mechanism where it is appropriate to do so. The recapitalisation payment mechanism is primarily intended to support the failure of small firms, and this remains the case under the Bank’s revised policy. The Bank will also have regard to the desirability for the purchaser to make appropriate contributions to the recapitalisation.

The Bank recognises that revisions to our MREL policy set out in the revised MREL SoP may result in potentially relatively more firms being transfer firms, reflecting a judgement about when a transfer preferred resolution strategy may be appropriate. In finalising the policy, we have balanced the need to ensure a proportionate approach that supports growth, competition, innovation and productive lending with the need to protect and enhance financial stability, minimise risk to public funds and avoid undue reliance on industry-financed funds. This judgement is summarised in Box A.

Transfer strategy firms will continue to be required to meet requirements under the Resolvability Assessment Framework Statement of Policy (RAF SoP). As set out in the RAF SoP, firms should develop the capabilities, resources and arrangements necessary to achieve the resolvability outcomes in a way which is appropriate to the resolution strategy (transfer or bail-in) that they have been set. The Bank’s SoP on restructuring planning does not apply, for example, to transfer firms. The Bank has published a summary of its approach to assessing resolvability.

Implications of a bail-in preferred strategy for MREL and RAF capabilities

Bail-in firms will be required to meet an end-state MREL of two times their MCR (or the international TLAC standard minima, if they are greater). The flexible glide path will continue to apply. Firms will ordinarily be notified three years ahead of coming into scope of stabilisation powers and have at least six years to meet their end-state MREL from the point at which they are set a bail-in resolution strategy, with scope for a flexible add-on of up to two years if circumstances require it.

For the avoidance of any doubt, bail-in firms will continue to be required to meet requirements under the RAF.

Transitioning to a transfer or bail-in strategy and associated requirements

Firms should continue to notify the Bank if they forecast to exceed any of the indicative thresholds on a three-year forward-looking basis, as set out in Section 9 of the MREL SoP. Firms approaching the indicative total assets, or transactional accounts thresholds, can expect to receive a periodic resolution letter, establishing a dialogue with the Bank as resolution authority. The firm’s notification will support heightened engagement with the Bank and firms may need to share additional information to support the Bank’s consideration of the appropriate preferred resolution strategy. The Bank works closely with the PRA when determining a preferred resolution strategy and will endeavour to provide an indication of a firm’s future preferred resolution strategy.

The Bank’s RAF SoP applies once a preferred resolution strategy is adopted. The RAF policy documentation sets out the timeline for compliance with RAF requirements, which is generally a minimum of at least 18 months. As set out above, for MREL there is ordinarily a six-year flexible glide path. Other resolution-related requirements, such as those set out in PRA rules or supervisory statements, are subject to their own transitional arrangements – links to these have been made available on a single webpage in the Prudential and Resolution Policy Index.

Transitioning out of a transfer or bail-in strategy and associated requirements

Some respondents asked whether and how a firm can come out of scope of a stabilisation power preferred resolution strategy. If firms forecast to remain sustainably below one or both of the indicative thresholds then, as part of its regular assessment of a firm’s preferred resolution strategy, the Bank would determine, in line with the MREL SoP, whether its preferred resolution strategy should change.

If a firm’s strategy were to change from bail-in to transfer or insolvency, and therefore MREL equal to MCR, this lower MREL would apply when the Bank changes the firm’s MREL direction under the Banking Act. For the avoidance of doubt, moving to a lower MREL is not subject to the transitional provisions in the MREL SoP.

Any changes to a firm’s preferred resolution strategy in light of the Bank’s revised policy would not come into effect until 1 January 2026 at the earliest. This would be a firm-specific judgement and the Bank will engage directly with affected firms as part of its ongoing engagement on resolvability.

Clarification of the availability of the flexible add-on

The Bank received feedback on impacts of potential stress-driven market conditions on CET1 and MREL resources. The Bank would like to remind firms that its existing policy allows firms to apply for a flexible add-on if they face challenges to raise funding. The Bank is clarifying in the revised MREL SoP (paragraph 9.9) that it would be willing to consider making the up to two-year flexible add-on available, if required, to a firm that had previously reached end-state MREL but which no longer met its MREL, or which forecast that it may no longer meet its MREL in the foreseeable future.

The Bank does not expect to ordinarily grant a flexible add-on to firms which have met their end-state MREL but will give consideration to each application on its merits, taking into account, among other things, prevailing market conditions. In the case of any application for the flexible add-on by a firm that is facing challenges to maintain sufficient MREL resources, the Bank will consider the extent to which any actual or prospective shortfall is attributable in whole, or in part, to the requirement to measure MREL resources at full accounting value and/or to inadequate capital and debt planning. This clarification does not change our current policy for granting the flexible add-on, which remains exceptional in nature.

Revisions to reflect findings from the Resolvability Assessment Framework and lessons from policy implementation

Appropriate basis for measuring MREL eligible liabilities

The Bank proposed to clarify in the MREL SoP that the accounting value of an eligible liability instrument should be used as the basis for measuring the value that can be used to meet a firm’s MREL. This was intended to promote consistent practice in the industry and ensure that firms maintain sufficient loss-absorbing resources at all times. The Bank received support from most respondents for the rationale for adopting the accounting value as the appropriate measurement basis for ELIs. Further information on the Bank’s rationale for this approach was set out in the CP published on 15 October 2024.

Several responses noted that using the accounting value of an eligible liability instrument may result in greater volatility in the value of eligible liabilities over time. Respondents raised concerns that the value of eligible liabilities could materially decrease under severe interest rate scenarios, due to fair value adjustments, while CET1 would likely be under pressure through stress-driven profitability impacts. As noted in the consultation, the Bank acknowledges that the extent of the volatility in the value of ELIs will depend on a firm’s required, or elected, accounting treatment of the instrument under the relevant accounting standards. And it will also depend upon several other factors such as changes in interest rates, the firm’s own credit standing, exchange rates and any associated prudential filters.

In response to this feedback, the Bank is clarifying that the revised policy does not prescribe a specified accounting treatment for ELIs. It is for firms to determine their compliance with accounting standards. It is the firms’ responsibility to manage their balance sheets in line with relevant accounting and prudential regulatory standards and requirements, including determining whether hedging is appropriate. In doing so, firms should forecast their capital needs to mitigate any risks, including any shortfalls relative to their requirements as a result of changes in interest rates. The Bank also notes that volatility in the value of ELIs does not necessarily cause a breach in MREL requirements but, initially at least, may instead result in the firm operating within regulatory capital buffers. Firms should refer to relevant PRA policies in relation to regulatory capital buffers.^{footnote [6]}

Some respondents made requests for clarification with respect to the appropriate measurement basis for Tier 2 capital instruments. In response to this feedback, in CP15/25, the PRA has proposed to clarify, that Tier 2 instruments should be measured at the full accounting value.

There were some requests for clarification with respect to the treatment of accrued interest given this does not generally meet the minimum maturity requirements to be eligible as MREL. In response to this feedback, the Bank is clarifying that accrued interest payments associated with a particular instrument should not be considered as a separate instrument which must satisfy MREL eligibility criteria. Eligibility criteria relate to the instrument itself rather than the cashflows associated with the instrument in question.

Independent legal advice

In the consultation, the Bank proposed clarifications to the existing expectation for firms to obtain instrument-specific independent legal advice on the eligibility for MREL of each eligible liability instrument, on the basis that an external instrument-specific legal opinion is the most effective means of providing independent assurance on instrument eligibility.

The Bank has considered whether an acceptable level of assurance on eligibility could be achieved through a modified approach. The Bank is therefore introducing a ‘repeat issuance’ exemption for certain eligible liability issuances of ELIs, taking a broadly similar approach to the PRA’s assurance process for Tier 2 instruments, while recognising that the Bank (unlike the PRA for own funds instruments) does not operate a pre or post-issuance notification process for new issuances of ELIs. This exemption is set out in Annex 3 of the revised MREL SoP and will operate as follows:

• A ‘repeat issuance’ (whether internal or external MREL) is one where the ‘material issuance terms’ relevant to MREL eligibility of an issuance of ELIs are 'substantially the same' as for a previous issuance of ELIs that received an external eligibility legal opinion. The MREL SoP Annex 3 allows for a limited number of changes that will permit an instrument to be considered a ‘repeat issuance’, such as the date and amount of issuance and interest rate.
• An issuance will not count as ‘substantially the same’ if there is any change in the provisions set out in MREL SoP Annex 3, paragraph 2. These include, for example, provisions governing subordination/ranking and any feature that might be considered a barrier to recapitalisation or an incentive to redeem.

Firms that have obtained satisfactory prior individual issuance eligibility legal opinions would be able to rely on those for a repeat issuance (as defined) in the following circumstances:

Firms remain responsible for ensuring that liabilities, including own funds instruments, are eligible for MREL and for obtaining external legal opinions at the time of issuance of each liability intended to be an MREL eligible liability. This continues to apply at the instrument level except for ELIs that may benefit from the repeat issuance exemption. The Bank intends to gain assurance around the use of the repeat issuance exemption via PRA MREL reporting and future RAF assessments.

The Bank considers this is a proportionate approach to the requirement for eligibility legal opinions in the case of repeat issuances of ELIs and will reduce some firms’ costs, especially for those firms which carry out multiple issuances under medium-term note programmes. As firms have asked for greater alignment with the PRA, this approach also has the additional advantage of closer alignment with the PRA approach for legal opinions in the case of Tier 2 capital instruments.

For the avoidance of doubt, the Bank confirms this exemption would only cover legal opinions for MREL eligibility. Individual external legal opinions on the effectiveness of bail-in may still be required at the instrument level, under any applicable local or governing law, for those issues of eligible liabilities instruments that are governed principally by non-UK law. The repeat issuance exemption will not apply to these types of legal opinions. This is in accordance with the Bank's obligations under the BRR No.2 Order.

Mismatching of internal and external MREL

The Bank has considered feedback relating to an inconsistency between the Bank’s proposal on simplifying the process for redemption of eligible liabilities and maintaining MREL SoP paragraph 8.13 unchanged (Section 3). While the Bank consulted on removing the UK CRR requirement for approval related to redemptions of ELIs by globally systemically important banks (G-SIBs), it maintained the MREL SoP requirement for pre-approval of changes in the form of internal MREL.

In response to this feedback, and in addition to the proposals consulted on, the Bank is amending current paragraph 8.13 of the MREL SoP to remove the requirement for a pre-approval for changes in the form of internal MREL. The Bank has instead confirmed that institutions should notify the Bank, at least 15-days in advance, if they propose actively to make any material change to the form of their internal MREL resources including any prospective cancellation or conversion to equity, that significantly reduces the amount of internal MREL ELIs. The Bank is clarifying that a change in the form of internal MREL resources due solely to accounting effects, at the point of redemption of an ELI, or otherwise, would not be considered to be a material change that a firm is proposing actively to make and therefore would not, all else equal, require any notification to be made.

3: Feedback on the Bank’s October 2024 consultation

UK CRR TLAC provisions and other related changes

Eligibility criteria for ELIs

The Bank proposed to streamline and clarify the eligibility criteria for MREL eligible liabilities by merging the UK CRR and existing MREL SoP requirements into a single, more comprehensible framework.

All feedback welcomed the consolidation and simplification of the frameworks. Many respondents expressed support for the proposals without further comment, noting the proposals would give the Bank greater flexibility in administering the regime. Responses clustered around three main themes: simplification of administrative burden and the consolidation of different regimes; cross-authority coordination; and technical clarifications. Respondents generally welcomed the greater level of clarity around eligibility criteria, and in particular, clarifications about the residual maturity of Tier 2 instruments.

Some respondents encouraged both the Bank and the PRA proactively to seek out opportunities for simplification and clarification as well as cross-authority coordination to increase market understanding of the impact of the changes proposed on firms. This was in the context of further changes being expected as a result of the announced timings of the revocation and restatement of the UK CRR and other similar proposals by HMT.

Some respondents requested several technical clarifications on the revised MREL SoP. In particular, they commented it would be desirable for the exception to non-eligibility of ELIs provided for in paragraph 1(b)(ii) of Annex 1 for liabilities owned in connection with, and only for, the duration of their initial distribution – to be extended to paragraph 1(b)(i) of Annex 1. The Bank agrees and has made this change in both paragraph 1(b)(i) and 1(c) of Annex 1 of the MREL SoP.

Deductions from MREL eligible liabilities resources

Some respondents provided feedback in support of the proposed scope of the deductions regime, highlighting it will provide alignment and consistency with international standards. A few respondents noted the proposed scope of the regime is unlikely to have a material impact on firms.

Some respondents raised concerns over additional costs incurred by firms, and the proportionality and value of the information, citing evidence from the Bank’s consultation that it is not common practice for non-G-SIB firms to hold G-SIB-issued ELIs in sufficient amounts to give rise to a deduction under the UK CRR eligible liabilities deductions regime. One respondent suggested the existing capital treatment appears to be effective at discouraging non-G-SIB firms from investing in G-SIB-issued ELIs. One other respondent suggested there are other supervisory tools available should a firm become overly exposed to G-SIB-issued ELIs, including Pillar 2.

In response, the Bank notes that while the proposal to extend the deductions regime beyond G-SIB resolution entities to all MREL firms could involve initial upfront costs for a subset of firms, there is an understanding that firms likely already have processes in place to identify the holdings non-G-SIB firms have of G-SIB issued ELIs, which could be utilised. Additionally, as noted in the consultation, the Bank considers it to be important to maintain and extend the scope of the deductions regime to all MREL firms to manage the risk of contagion from the failure of a G-SIB, and promote closer alignment with international standards. The Bank notes that, as mentioned in the consultation, all MREL firms are considered by the Bank to be firms where the use of stabilisation powers may be needed to advance the statutory resolution objectives under the Banking Act. The Bank has therefore not changed the proposed scope.

One respondent commented that an approach similar to the PRA’s SDDT proposals could be followed. The Bank considers the proposed regime proportionate and appropriate given the existence of a limited 30-day exemption for holdings in the trading book, and that a deduction will not need to be made if a firm does not hold G-SIB-issued ELIs in sufficient amounts to give rise to a deduction under the revised MREL SoP.

A few respondents requested clarification as to the relationship between paragraph 7.14 and the operation of Annex 2 Section 1 paragraph 1(d) of the revised MREL SoP. In response to these comments, the Bank is clarifying that the intention of paragraph 7.14 is to provide for an increase in the internal MREL requirements of an intermediate entity that itself has subsidiaries so as to reflect any internal MREL instruments issued by the subsidiaries and, therefore, avoid MREL resources being double-counted at the intermediate entity level. Annex 2 Section 1 paragraph 1(d), which applies in the context of G-SIBs holding ELIs issued by their subsidiaries, overrides and disapplies paragraph 7.14. The Bank has added a sentence to the provision in Annex 2 of the revised MREL SoP in order to clarify this.

In the consultation the Bank proposed not to require a deduction from eligible liabilities resources for holdings by an intermediate entity of internal ELIs issued by a subsidiary, as this position is already addressed in paragraph 7.14 of the current MREL SoP. The Bank would like to further clarify that this exception is not applicable to G-SIB firms, which could be required to make a deduction under Annex 2 Section 1 paragraph 1(d) as mentioned above.

Several respondents requested clarification on the definition of G-SIB entities, and whether this aligns with the CRR definition of globally systemically important institution (G-SII) entities. The Bank is clarifying that a G-SIB ‘entity’ is a G-SIB or any subsidiary of a G-SIB.

A few respondents sought clarification on whether the holdings that are deducted from eligible liabilities resources are subject to risk weighting. The Bank is clarifying that, unlike in the case of deductions from own funds, there is currently no exemption from risk weighting for exposures in respect of holdings required to be deducted from eligible liabilities resources.

One respondent sought greater understanding on the links between the regime for own funds and that of the proposed deductions regime for MREL firms. The requirements under Articles 66(e) and 72(e) of the UK CRR will continue to apply in practice, albeit residing in new locations. Article 66(e) is expected to be restated in the Own Funds (CRR) Part of the PRA’s Rulebook, while article 72(e) will be restated (with modifications) in the MREL SoP. In practice, this means that for certain eligible liabilities which should be deducted from MREL resources, and if the amount of the deduction exceeds the value of eligible liabilities resources held, then the institution must deduct the excess amount first from its Tier 2 items and then, on exhaustion of its Tier 2 items, from its AT1 items.

Redemptions and reductions of external instruments

Most respondents welcomed the proposals to cease to maintain a general prior permissions process. One respondent proposed the Bank also consider the PRA’s established process for seeking permissions for the redemption of own funds. Having considered this feedback, the Bank is implementing the proposal as consulted on.

Unrelated to the general prior permission policy change, some respondents raised concerns about needing to obtain permission from the Bank prior to changing the form of internal MREL instruments, in line with the MREL SoP. The respondents considered that maintaining this provision while removing the general prior permission created an inconsistency with the rest of the policy. The Bank has amended its final policy in response, as set out in Section 2.

Contractual triggers for internal MREL instruments and other expectations for non-CET1 own funds instruments

The majority of respondents did not welcome the Bank’s proposal to require the inclusion of contractual triggers in internal non-CET1 own funds instruments rather than being considered by firms in the context of their resolvability, as is now the case.

Respondents’ principal arguments against the proposal included:

• The Bank already has statutory mandatory reduction and bail-in powers to recapitalise a failing material subsidiary in different scenarios. The inclusion of contractual triggers therefore does not provide any additional benefit to the Bank to achieve the same outcome.
• Some respondents commented the proposal should not apply to UK material subsidiaries, especially those below the UK parent in a simple group structure, as it is reasonably unlikely for such a group to enter into resolution, without the single material subsidiary meeting the conditions for a point of non-viability statutory write-down. The inclusion of the triggers for non-UK material subsidiaries should be agreed in crisis management groups and other international fora in cooperation with the host resolution authority, rather than being set unilaterally as a requirement in the UK’s MREL policy.
• Inclusion of the triggers increases the Bank’s discretion in resolution, which in turn reduces the transparency and credibility of the resolution regime and puts the current statutory safeguards at risk. By allowing a contractual right to circumvent the statutory framework, there is a risk of undermining the safeguards that ensure decisions by the Bank are made with appropriate scrutiny and justification.
• The Bank’s proposal goes beyond the FSB standard and the equivalent regimes in other jurisdictions, thus putting UK firms at a competitive disadvantage internationally. One respondent noted a ‘high probability’ that reciprocal policies would be introduced by other jurisdictions.
• Inclusion of the triggers may lead to an accounting change in internal Tier 2 instruments, which would in turn affect the profit and loss statement at the parent level. Firms have also noted that accounting changes resulting from the proposal may lead to tax risk for instruments deemed as ‘hybrid capital instruments’. In addition, the inclusion of the triggers for instruments which have been issued already should not require firms to submit a formal application to the PRA and reassessment of eligibility criteria, as this would impose additional operational and legal costs on them.
• Firms requested exemption of the instruments which have been already issued or, failing that, an extended transitional period to implement the new policy, highlighting the challenges of communicating complex requirements to multiple overseas regulators.
• Some firms objected that, in addition to the one-off repapering costs and implementation frictions set out above, the proposed changes would also give rise to ongoing pricing considerations for internal MREL because of the implications for credit subordination. They argued the subordination status of instruments issued under these new terms would be made more ambiguous because the instruments could be the subject of an arbitrary write-down/conversion power that can be exercised in a broader set of circumstances and with less due process.
• More than one respondent urged the Bank to have regard to the extent to which a firm’s resolution planning includes contractual arrangements that would deliver comparable outcomes in resolution to those envisaged from the inclusion of contractual triggers, for example intragroup contractual support agreements.

The Bank has amended its policy in response to this feedback, as set out in Section 2. In addition, the Bank is clarifying that the purpose of the requirement is to facilitate the upstreaming of losses from material subsidiaries or subgroups that are set an MREL to the parent resolution entity. Accordingly, the requirement to include contractual triggers in the terms of instruments intended to qualify as internal MREL is limited to material subsidiaries, the parent entities of material subgroups, and any intermediate entities along the chain of internal MREL issuance. It does not extend to other subsidiaries that may have issued own funds instruments such as those of PRA regulated firms not subject to MREL in excess of minimum capital requirements.

As regards the tax treatment of instruments including their qualification under the UK’s ‘hybrid capital instruments’ (HCI) regime, firms should consult their own tax advisers as individual firm circumstances and the characteristics of their instruments will vary. The elective HCI regime is important for UK corporation tax deductibility of interest, but only applies to instruments where the issuer is entitled to defer or cancel interest payments and the instrument has no other significant equity features (ignoring write-down or conversion events in qualifying cases). Typically, issuers will aim to ensure that HCI elections are made for AT1 instruments, but not Tier 2 instruments or ELIs. In addition, the Bank notes that His Majesty’s Revenue and Customs’ (HMRC) view on instruments (including internal MREL instruments) containing contractual write down or conversion triggers in order to comply with a regulatory requirement is specifically addressed under the Qualifying cases in the Loan relationships: hybrid capital instruments section of HMRC’s Corporate Finance Manual.^{footnote [7]} HMRC’s guidance sets out where it would accept that such contractual triggers have been included to comply with a ‘regulatory requirement’ for the purposes of the HCI regime.

HMRC’s Corporate Finance Manual also sets out HMRC’s views on the meaning of ‘distributions’ for HCI and other securities issued by companies whose capital base, and the terms of instruments issued as part of that capital base, are subject to regulation, including in relation to those which acknowledge a statutory or regulatory bail-in regime.^{footnote [8]}

In the Bank’s view, the use of intragroup contractual support agreements in place of contractual triggers in internal MREL debt instruments, which may be designed to meet the policy requirements of an overseas regulator and not governed by UK law, would be time-consuming and legally intensive, for both the Bank and relevant firms, without necessarily achieving the same outcome. The Bank therefore has not adopted this suggestion. However, the Bank has no objection to contractual triggers in the form required by the MREL SoP being placed in an existing intragroup contractual support agreement, provided the intended legal right to direct is validly conferred on the Bank.

Revocation of the MREL UK technical standards

The Bank did not receive specific comments on the revocation of the MREL UKTS, although some respondents welcomed the simplification alongside the revocation of the UK CRR TLAC provisions. As set out in Table A, the revocation of the MREL UKTS will be effective from 1 January 2026.

Updates to the Bank’s indicative thresholds for setting a stabilisation power preferred resolution strategy

The Bank received a substantial amount of feedback relating to these questions, with respondents covering the specific consultation proposals as well as broader feedback on the Bank’s approach to determining preferred resolution strategies and MREL.

Adjusting the total assets indicative threshold

On the Bank’s approach to indexing the total assets indicative threshold, many respondents called for the indexation period to begin from 2016 when the Bank first implemented the thresholds. While other respondents called for a later cut-off for the indexation period, covering the period from the end-2023 date used in the consultation proposal to the period until revised policy was proposed to be implemented in 2026. Respondents also called for a regular indexation and/or review of the indicative thresholds. The Bank has revised its approach to indexation and this is described in Section 2.

Several respondents called for increases beyond those implied by extending the indexation period. Some respondents highlighted thresholds used in other jurisdictions, pointing to higher policy thresholds in the United States (US) and European Union (EU), such as €100 billion in the EU. One respondent noted that an international comparison would be useful. The Bank works closely with counterparts in other jurisdictions as part of its ongoing policy development and implementation work. While jurisdictions have common objectives for effective resolution, as set out in international standards, specific approaches vary. Individual thresholds may not reflect the complexity of the framework. Within the EU, for example, MREL is set for a number of firms considerably smaller than €100 billion. Different jurisdictions may make different judgements on where the costs of failing firms (Box A) should fall. These judgments may be shaped by their legal framework, characteristics of their banking industry, broader regulatory landscape and markets.

Respondents also highlighted developments in prudential regulation, such as the Basel 3.1 package and solvent exit planning policy, and the Bank Resolution (Recapitalisation) Bill (since enacted as the BRRA 25), as reasons for further increases in the level of the thresholds. With respect to prudential requirements, the Bank notes the PRA’s solvent exit planning policy focuses on non-systemic banks and building societies – these will typically also be modified insolvency firms. The Bank also notes that changes under Basel 3.1 will be reflected in a firm’s MREL because it is calibrated based on a firm’s capital requirements. The Bank has taken the BRRA 25 into account in finalising its revised policy.

Approach to preferred resolution strategy setting

Respondents called for more clarity and predictability in the Bank’s approach to determining a preferred resolution strategy. One idea suggested was to replace the indicative range with a single threshold. They also asked the Bank to clarify how it considers other factors, including vulnerable customers and different business models, in setting resolution strategies.

Other feedback included a request for additional clarity on how a firm can come out of scope of MREL, calls for greater use of a transfer preferred resolution strategy and consideration of a broader range of factors in making this judgement, a call for a bail-in preferred strategy to only be set where a firm is above both the total assets and transactional accounts thresholds, and a suggestion the total assets measure be replaced with something that better captures proximity/risk of failure.

The Bank has considered this feedback and sought to provide further clarity on its approach to setting preferred resolution strategies in its final policy, as well as an explanation of these changes in Section 2. The Bank has also provided some illustrative examples of how a firm’s preferred resolution strategy may change as it grows.

MREL for bail-in firms

Some respondents suggested the amount of MREL required for firms with a preferred resolution strategy of bail-in could be reduced from two times the firm’s MCR. Some feedback suggested alternative ways that MREL could be calibrated. The Bank considers the calibration of the amount of end-state MREL remains appropriate. MREL needs to be sufficient to absorb losses and recapitalise the continuing business, in order to allow for an orderly and successful restructuring. The current calibration is designed to ensure that firms have the resources to support this.

MREL for transfer firms

There was general support for the proposal to make MREL equal to MCR for firms with transfer preferred resolution strategies, seeing it is a positive and proportionate step. Some respondents also suggested the proposal should not be contingent on the BRRA 25 on the grounds he acquirer of a firm should be responsible for bearing any recapitalisation costs. Some respondents called for the Bank to provide clarity on whether it would exercise discretion to set MREL greater than MCR for some firms with transfer strategies.

On the other hand, other respondents suggested the Bank should retain discretion to set MREL greater than MCR for transfer firms, with some providing starker feedback against the proposal. This feedback emphasised the importance of the ‘polluter pays’ principle, considered that the proposal is not consistent with the Bank’s approach in the 2021 MREL Review, and noted the contingent impact on industry via the FSCS levy. They suggested the FSCS levy calculation be reviewed, considering the polluter pays principle, and the Bank consider bringing firms who remain on the margins of thresholds into the MREL regime, even if they sit below the threshold.

The Bank has set out its final policy on MREL for transfer firms in Section 2, having taken into account feedback received and the passage of the BRRA 25.

Indicative transactional accounts threshold

Respondents questioned the need for the transactional accounts indicative threshold and said it should be removed or raised to 100,000–150,000 transactional accounts, with some respondents suggesting it should be raised to 1 million transactional accounts. They highlighted the UK is the only country with such a threshold, and that it disincentivises firms to grow this area of their business and is anti-competitive. Some respondents suggested the introduction of the FSCS digital payment portal and changes in technology and consumer banking behaviour (including the ability to more easily open a new account/switch service provider and more customers having multiple bank accounts) negates the need for the threshold and/or warrants a higher threshold.

In addition to raising the transactional accounts threshold, some respondents provided feedback that the Bank should change the definition of the transactional accounts, as they considered the current definition (accounts from which withdrawals have been made nine or more times within a three-month period) to be too broad to meet the definition of a critical function, that it does not reflect changes in consumer banking behaviour (decreased cash use and increase in electronic transactions), and that it captures some non-primary and savings accounts. Some respondents suggested the Bank consider amending the definition, with various suggestions on how best to do this.

The Bank has set out its final policy and next steps with respect to the indicative transactional accounts threshold in Section 2.

Revisions to reflect findings from the Resolvability Assessment Framework and lessons from policy implementation

Appropriate basis for measuring MREL eligible liabilities

There was general support for adopting the accounting value as the appropriate measurement basis for eligible liabilities, highlighting that the clarification of this aspect of the policy ensures consistency and alignment in firms’ practices. One respondent noted the Bank’s proposal is consistent with the approach set out in the EBA’s recently published monitoring report.

Some respondents confirmed that using the accounting value of an eligible liability instrument may result in greater volatility in the value of eligible liabilities over time. Respondents raised concerns the value of eligible liabilities could materially decrease under severe interest rate scenarios, due to fair value adjustments, while CET1 would likely be under pressure through stress-driven profitability impacts. They suggested that additional eligible liabilities may be needed in normal conditions to cover for the potential volatility in a stress, resulting in greater costs for firms. Some respondents considered the proposed approach to be proportionately more costly for mid-sized firms as they face greater challenges relative to larger firms when accessing capital markets. One respondent however mentioned that the volatility in the value of MREL eligible liabilities is appropriate as it reflects the non-static nature of these instruments on the balance sheet relative to the external environment.

Some respondents requested clarifications with regards to the treatment of non-CET1 own funds instruments, noting the measurement basis for own funds is not explicitly mandated within the UK CRR beyond Article 64, which sets out the calculation for Tier 2 amortisation, expressing a preference for a combined and consistent approach along with clear communications from both authorities on this subject.

Some respondents requested clarification about the treatment of accrued interest as it is considered generally not to meet the minimum maturity requirements for MREL eligibility, and one respondent requested confirmation that the proposed approach applies to internal MREL.

The Bank has confirmed in Section 2 that it is implementing the proposed clarification on the preferred measurement basis as consulted. The Bank is also addressing comments about the management of volatility resulting in measuring MREL on an accounting basis and clarifying the treatment of accrued interest payments. In CP15/25 the PRA has proposed to clarify, that Tier 2 instruments should be measured at the full accounting value.

Assurance for meeting MREL policy

Responses focused on the costs of obtaining legal opinions and alignment with PRA approaches.

A majority of respondents expressed concern that the cost of legal opinions at instrument level was disproportionate and the process of obtaining instrument-level legal opinions would be duplicative, onerous, and unduly burdensome on firms. The respondents also commented those proposals for eligible liabilities created a regime that was more stringent than that for own funds. One respondent was however supportive of the proposal and believed it would drive consistency across the industry.

Some respondents argued that their issuance programmes are designed to be compliant with the MREL regime, with legal advisor involvement throughout the process, and therefore do not need additional legal opinions beyond the one provided at programme level. Several proposed an alternative to instrument-level legal opinions in the form of an exemption for issuances that were on ‘substantially the same terms’ ie differing only in maturity, issuance cost, and other factors in accordance with the PRA’s definition of ‘substantially the same’.

A few respondents requested clarification that this policy would not apply to existing issuances. In response to feedback, Section 2 sets out the Bank’s final approach with regard to the obtaining of legal opinions, including clarifications on the application of this policy to existing issuances.

Other feedback received

Impact of MREL policy

Some respondents suggested the Bank should undertake and publish a cost benefit analysis as part of finalising its revised MREL SoP, and more broadly, for future revisions to its policies. Some feedback also recommended the Bank consider the impact of its policy proposals, and more broadly, of the resolution regime, on economic growth, competitiveness and competition.

They argued the cost of MREL is disproportionately higher for smaller banks. They noted that under international standards, TLAC applies only to G-SIBs, and that the Bank, following the UK’s exit from the EU, should consider whether the application of MREL to non-systemic firms is appropriate. Some argued that MREL incentivises higher risk taking and higher margin lending to compensate for the costs associated with the issuance of MREL eligible liabilities. The respondent also noted that MREL has acted as one of the constraints on strategic mergers and acquisitions.

Some responses called for greater alignment between going-concern prudential policy set by the PRA and gone-concern resolution policy set by the Bank as resolution authority.

The Bank has considered carefully the impact of its MREL policy. This includes the challenges faced by smaller firms in issuing MREL eligible liabilities. For example, the Bank’s MREL SoP continues to set out substantial transitional arrangements for firms coming into scope of MREL, including an up to three-year notice period and a subsequent glide path to end-state MREL that is ordinarily six years. The Bank’s revised approach to its total assets indicative threshold will also provide smaller firms with additional growing space before being potentially brought into a bail-in preferred resolution strategy and being set an MREL above MCR. The Bank has worked closely with the PRA on the development and finalisation of its revised MREL policy and considers the revised policy continues to provide a robust and proportionate foundation for managing bank and building society failures.

Reporting

One respondent sought an update on the timing of the review of SS19/13, including that of the PRA’s MREL Reporting templates. The Bank and PRA will consider if the existing content of resolution packs, as set out in SS19/13, and other resolution information requirements remain appropriate. Additionally, to reflect the changes set out in the revised MREL SoP, the PRA has published a consultation on amendments to MREL reporting.

Equality and diversity

The Bank noted in its consultation that it considered that its proposals did not give rise to adverse equality and diversity implications. The Bank did not receive any comments from respondents in respect of the proposals having equality or diversity implications.

Prudential requirements and broader legislative framework

The Bank also received feedback on other aspects of prudential policy set by the PRA or the legislative framework for financial services more broadly. Where appropriate, the Bank has shared this feedback with the PRA.

On the broader legislative framework, which is a matter for Parliament and the Government, some respondents noted divergence between how PRA and Financial Conduct Authority (FCA) solo-regulated firms are treated as there are various FCA regulated e-money firms with transactional accounts over the Bank's threshold, but no equivalent MREL regime. As set out in legislation, FCA solo-regulated firms are subject to a different regulatory framework and are out of scope of the Bank’s resolution regime and therefore any resolvability assessment or MREL requirements.

Annexes

• Annex 1: Abbreviations

  AT1 – Additional Tier 1.

  Bank – Bank of England.

  Banking Act – Banking Act 2009.

  BRRA 25 – Bank Resolution (Recapitalisation) Act 2025.

  BRR No. 2 Order – Bank Recovery and Resolution (No. 2) Order 2014 (2014 No. 3348).

  CET1 – Common Equity Tier 1.

  CRR – Capital Requirements Regulation – the assimilated UK law version of Regulation 575/2013/EU.

  CP – consultation paper.

  ELI – eligible liabilities instrument.

  EU – European Union.

  FCA – Financial Conduct Authority.

  FSB – Financial Stability Board.

  FSCS – Financial Services Compensation Scheme.

  FSMA 2000 – Financial Services and Markets Act 2000.

  GFC – Global Financial Crisis.

  G-SIB – global systemically important bank.

  G-SII – global systemically important institution.

  HCI – hybrid capital instrument.

  HMRC – His Majesty’s Revenue and Customs.

  HMT – His Majesty’s Treasury.

  IDOBI – improving depositor outcomes in bank or building society insolvency.

  iMREL – internal minimum requirement for own funds and eligible liabilities.

  MCR – minimum capital requirements.

  MREL – minimum requirement for own funds and eligible liabilities.

  MREL UKTS – MREL UK Technical Standards – the assimilated law version of European Commission Delegated Regulation (EU) 2016/1450.

  PRA – Prudential Regulation Authority.

  PS – policy statement.

  RAF – Resolvability Assessment Framework.

  SDDTs – small domestic deposit takers.

  SoP – statement of policy.

  SVB – Silicon Valley Bank.

  UK – United Kingdom.

  UKTS – UK Technical Standard.

  US – United States.

  TLAC – Total loss absorbing capacity.

• Annex 2: Final revised MREL SoP

  Certain of the amendments set out in the revised statement of policy (SoP) are made on the assumption that some or all of the following take place:

  • The revocation of the UK CRR TLAC provisions, set out in Annex 3 of this PS, being brought into force.
  • The commencement by HMT of the BRRA 25 and the introduction of the recapitalisation payment mechanism provided for in that Act.
  • The Bank Recovery and Resolution (Amendment) Regulations 2025, amending the BRRA No.2 Order, coming into force.
  • The revocation of the MREL UKTS being brought into force.

  Certain references in the revised statement of policy to the PRA’s Rulebook and other PRA policy materials are subject to consultation and final implementation by the PRA.

  Revised MREL SoP (future version, effective 1 January 2026).

  Tracked change comparison between current MREL SoP and future MREL SoP.

• Annex 3: Final version of destination table

  The following table sets out the UK CRR provisions in scope of the exercise described in Section 2. The table indicates the expected treatment for each provision to be revoked.

  The proposed treatment is indicated as follows:

  • R – restated, with appropriate modifications, in revised MREL SoP.
  • E – not restated as substance already present in existing UK MREL regime.
  • NR – not restated as outcome not required or not aligned with UK MREL regime.

  UK CRR Article	Proposed treatment	Proposed destination or relevant existing provision
  General principles
  Article 6(1a)	NR	MREL SoP, paragraphs 6.1, 7.4
  General treatment
  Article 11(3a)	NR	MREL SoP, paragraphs 6.1, 7.4
  Consolidated calculation for G-SIIs with multiple resolution entities
  Article 12a	NR	MREL SoP, paragraphs 6.8, 6.9
  Methods of prudential consolidation
  Article 18(1) (paragraph 2)	NR	MREL SoP, paragraphs 6.1, 7.5
  Eligible liabilities items
  Article 72a(1)(a)	R	MREL SoP Annex 1, paragraph 1
  Article 72a(1)(b)	R	MREL SoP Annex 1, paragraph 6(b)
  Article 72a(2)(a–j)	E	MREL SoP, paragraph 2.3 and Banking Act section 48B(8)
  Article 72a(2)k and l	E	MREL SoP, paragraph 5.6
  Eligible liabilities instruments
  Article 72b(1)	R	MREL SoP Annex 1, paragraph 1
  Article 72b(2)(a)	R	MREL SoP Annex 1, paragraph 1(a)
  Article 72b(2)(b)	R	MREL SoP Annex 1, paragraph 1(b)
  Article 72b(2)(c)	R	MREL SoP Annex 1, paragraph 1(c)
  Article 72b(2)(d)	R	MREL SoP Annex 1, paragraph 1(d)
  Article 72b(2)(e)	R	MREL SoP Annex 1, paragraph 1(e)
  Article 72b(2)(f)	R	MREL SoP Annex 1, paragraph 1(f)
  Article 72b(2)(g)	R	MREL SoP Annex 1, paragraph 1(g)
  Article 72b(2)(h)	R	MREL SoP Annex 1, paragraph 1(h)
  Article 72b(2)(i)	R	MREL SoP Annex 1, paragraph 1(i)
  Article 72b(2)(j)	R	MREL SoP Annex 1, paragraph 1(j)
  Article 72b(2)(k)	NR	Restriction not considered necessary taking into account other MREL SoP provisions relating to reductions of ELIs
  Article 72b(2)(l)	R	MREL SoP Annex 1, paragraph 1(k)
  Article 72b(2)(m)	R	MREL SoP Annex 1, paragraph 1(l)
  Article 72b(2)(n)	R	MREL SoP Annex 1, paragraph 1(m)
  Article 72b(3)	NR	Resolution authority discretion not aligned with the Bank’s policy requiring subordination of ELIs
  Article 72b(4)	NR	As above
  Article 72b(5)	NR	As above
  Article 72b(6)	NR	Requirement to consult PRA not considered necessary in the UK context
  Article 72b(7)	NR	The Bank does not require a power to make additional technical standards
  Amortisation of eligible liabilities instruments
  Article 72c(1)	R	MREL SoP Annex 1, paragraph 6(a)
  Article 72c(2)	E	MREL SoP, paragraph 5.4
  Article 72c(3)	E	MREL SoP, paragraph 5.4
  Article 72c(4)	E	MREL SoP, paragraph 5.4
  Consequences of the eligibility conditions ceasing to be met
  Article 72d (paragraph 1)	R	MREL SoP Annex 1, paragraph 1
  Article 72d (paragraph 2)	NR	Relates to use of resolution authority discretion that is not aligned with the Bank’s policy requiring subordination of ELIs
  Deductions from eligible liabilities items
  Article 72e(1)(a)	R	MREL SoP Annex 2, section 1, paragraph 1(a)
  Article 72e(1)(b)	R	MREL SoP Annex 2, section 1, paragraph 1(b)
  Article 72e(1)(c)	R	MREL SoP Annex 2, section 1, paragraph 1(c)
  Article 72e(1)(d)	R	MREL SoP Annex 2, section 1, paragraph 1(d)
  Article 72e(2)	R	MREL SoP Annex 2, section 1, paragraph 2
  Article 72e(3)	NR	Relates to use of resolution authority discretion that is not aligned with the Bank’s policy requiring subordination of ELIs
  Article 72e(4)	R	MREL SoP Annex 2, section 1, paragraph 3
  Deductions of holdings of own eligible liabilities instruments
  Article 72f(a)	R	MREL SoP Annex 2, section 2
  Article 72f(b)	R	MREL SoP Annex 2, section 2
  Article 72f(c)	R	MREL SoP Annex 2, section 2
  Deduction base for eligible liabilities items
  Article 72g	R	MREL SoP Annex 2, section 3
  Deduction of holdings of eligible liabilities of other G-SII entities
  Article 72h(a)	R	MREL SoP Annex 2, section 4
  Article 72h(b)	R	MREL SoP Annex 2, section 4
  Deduction of eligible liabilities where the institution does not have a significant investment in G-SII entities
  Article 72i (1)(a)	R	MREL SoP Annex 2, section 5, paragraph 1(a)
  Article 72i (1)b	R	MREL SoP Annex 2, section 5, paragraph 1(b)
  Article 72i (2)	R	MREL SoP Annex 2, section 5, paragraph 2
  Article 72i (3)(a)	R	MREL SoP Annex 2, section 5, paragraph 3(a)
  Article 72i (3)(b)	R	MREL SoP Annex 2, section 5, paragraph 3(b)
  Article 72i (4)	R	MREL SoP Annex 2, section 5, paragraph 4
  Article 72i (5)	R	MREL SoP Annex 2, section 5, paragraph 5
  Trading book exception from deductions from eligible liabilities items
  Article 72j (1)(a)	R	MREL SoP Annex 2, section 6, paragraph 1(a)
  Article 72j (1)(b)	R	MREL SoP Annex 2, section 6, paragraph 1(b)
  Article 72j (2)	R	MREL SoP Annex 2, section 6, paragraph 2
  Article 72j (3)	R	MREL SoP Annex 2, section 6, paragraph 3
  Eligible liabilities
  Article 72k	R	MREL SoP Annex 2, section 1, paragraph 1
  Own funds and eligible liabilities
  Article 72l	E	Banking Act section 3A(4) and section 3A(4B)
  Distributions on instruments
  Article 73(1)	R	MREL SoP, Annex 1, paragraph 2
  Article 73(2)	NR	The Bank’s decision to grant permission for liabilities in relation to which an institution has the sole discretion to pay distributions in a form other than cash or own funds instruments as set out in MREL SoP, Annex 1, paragraph 2 will be a case by case judgment
  Article 73(3)	R	MREL SoP, Annex 1, paragraph 3
  Article 73(4)	R	MREL SoP, Annex 1, paragraph 4
  Article 73(5)(a)	R	MREL SoP, Annex 1, paragraph 4
  Article 73(5)(b)	R	MREL SoP, Annex 1 paragraph 4
  Article 73(6)	NR	Reporting and disclosure will be addressed separately (‘1: Introduction’)
  Article 73(7)	NR	MREL SoP, Annex 1, paragraph 4
  Deduction and maturity requirements for short positions
  Article 75	R	MREL SoP Annex 2, section 7
  Index holdings of capital instruments
  Article 76(1)(a)	R	MREL SoP Annex 2, section 8, paragraph 1(a)
  Article 76(1)(b)	R	MREL SoP Annex 2, section 8, paragraph 1(b)
  Article 76(1)(c)	R	MREL SoP Annex 2, section 8, paragraph 1(c)
  Article 76(1)(d)	R	MREL SoP Annex 2, section 8, paragraph 1(d)
  Article 76(2)(a)	R	MREL SoP Annex 2, section 8, paragraph 2(a)
  Article 76(2)(b)	R	MREL SoP Annex 2, section 8, paragraph 2(b)
  Article 76(2)(c)	R	MREL SoP Annex 2, section 8, paragraph 2(c)
  Article 76(3)	R	MREL SoP Annex 2, section 8, paragraph 3
  Article 76(4)(a)	NR	MREL SoP Annex 2, section 8, paragraph 2
  Article 76(4)(b)	NR	SoP Annex 2, section 8, paragraph 4
  Conditions for reducing own funds and eligible liabilities
  Article 77 (1)	NR	Relates only to own funds instruments
  Article 77 (2)	NR	MREL SoP, paragraph 5.5
  Permission to reduce eligible liabilities instruments
  Article 78a	NR	MREL SoP, paragraph 5.5
  Temporary waiver from deduction from own funds and eligible liabilities
  Article 79	R	MREL SoP Annex 2, section 9
  Assessment of compliance with conditions for own funds and eligible liabilities instruments
  Article 79a	R	MREL SoP, paragraph 5.13
  Requirements for own funds and eligible liabilities for G-SIIs
  Article 92a(1)(a)	R	MREL SoP, paragraph 4.11(a)
  Article 92a(1)(b)	R	MREL SoP, paragraph 4.11(a)
  Article 92a(2)(a)	NR	The Bank could consider using its power to set a ‘transitional’ MREL under MREL SoP, paragraph 9.13
  Article 92a(2)(b)	NR	MREL SoP, paragraph 9.6
  Article 92a(2)(c)	NR	The Bank could consider using its power to set a ‘transitional’ MREL under MREL SoP, paragraph 9.13
  Grandfathering of own funds instruments and eligible liabilities instruments
  Article 494b(1)	NR	Relates only to AT1 instruments
  Article 494b(2)	NR	Relates only to Tier 2 instruments
  Article 494b(3)	R	MREL SoP Annex 1, paragraph 5(b)

• Annex 4: List of respondents who have consented to the publication of their names

  Association for Financial Markets in Europe (AFME)

  Aldermore Group PLC

  Allica Bank

  Building Societies Association (BSA)

  ClearBank Limited

  Handelsbanken

  HSBC

  Innovate Finance

  JPMorganChase

  Leeds Building Society

  Lloyds Banking Group

  Metro Bank

  Monument

  Monzo Bank

  NatWest Group

  OakNorth Bank

  OSB Group

  Santander UK

  Starling Bank

  UK Finance