Operational guide to bail-in resolution

1: Introduction

Purpose of the guide

1.1 The Bank of England (the Bank), as the UK’s resolution authority, is responsible for taking action to manage the failure of certain financial institutions, including UK headquartered banking groups and UK-incorporated banks and building societies (together, firms),^{footnote [1]} 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 of the firm can continue and helping to preserve 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 losses will fall on a failed firm’s investors, rather than depositors or taxpayers, resolution can both reduce the risk of firm failures by supporting market discipline and limit the impact of failure when it does occur.

1.2 Bail-in is one of the stabilisation tools available to the Bank as resolution authority under the Banking Act 2009 (the Banking Act).^{footnote [2]} Bail-in ensures investors, rather than public funds, bear losses. Bail-in enables the Bank to impose losses on shareholders and to write down or convert into equity the value of the claims of certain unsecured creditors, so that the failed firm can be recapitalised and continue to operate thereby ensuring the continuity of critical functions pending a reorganisation of the business that addresses the causes of failure. The exposure of shareholders and creditors to losses in resolution should respect the order in which they would have received distributions in an insolvency of the firm,^{footnote [3]} and leave them no worse off than they would have been if the firm had been placed into an insolvency process. This is a key protection for investors in firms and known as the ‘no creditor worse off’ safeguard.^{footnote [4]} The Bank considers that for the largest, systemically important firms – including UK global systemically important banks (G-SIBs) and domestic systemically important banks (D-SIBs) – the use of a bail-in resolution strategy is likely to be the way in which the special resolution objectives would best be met in the event of the failure of the firm. Firms which have been set a bail-in preferred resolution strategy are required to hold additional loss absorbing resources.

1.3 The purpose of this document is to provide practical information on how the Bank might execute a bail-in resolution, and in particular the operational processes and arrangements that may be involved in this. This document is technical in nature and is likely to be of particular interest to those who may be directly affected by or involved in a bail-in. This includes firms for which bail-in is the preferred resolution strategy; shareholders and holders of eligible liabilities which may be subject to bail-in and custodians acting on their behalf; other creditors of such firms; financial market infrastructures and other market participants that may be involved in the execution of a bail-in; and others who would have an interest in resolution actions, such as host authorities of UK banking groups subject to bail-in. The document also provides practical information which may be relevant where the Bank executes a transfer of a failed firm to a bridge bank or private sector purchaser. This includes, for example, the steps necessary to write down regulatory capital instruments. Further information on the operational execution of a transfer can be found in the Operational guide to transfer resolution.

1.4 In terms of the structure of this document:

• Part 1 is this introduction.
• Part 2 describes actions and processes that may take place in the lead up to a resolution, referred to as the ‘pre-resolution contingency planning’ period.
• Part 3 describes actions that are likely to take place during the period immediately prior to and in which a firm is put into resolution by the Bank. This period is often referred to as the ‘resolution weekend’.^{footnote [5]}
• Part 4 sets out what may happen during ‘the bail-in period’, where the firm will be closely monitored by the Bank and any resolution administrator (sometimes referred to as a ’Bail-in Administrator’, or ‘BiA’) appointed by the Bank whilst the bail-in process is completed and other actions, such as developing a post-resolution business reorganisation plan, take place.
• Part 5 concludes with the exit from resolution and transfer of control of the resolved firm to bailed-in creditors. Selected terms and abbreviations are provided in a glossary.

1.5 The 2026 update to this document provides further information on the Bank’s approach to interim rights and the delivery of shares at the conclusion of the bail-in. It also provides technical updates to reflect operational developments since 2021.

1.6 To facilitate resolution, the Bank is required to set a minimum requirement for own funds and eligible liabilities^{footnote [6]} (MREL) for all UK institutions.^{footnote [7] footnote [8]} The objective of MREL is to ensure a firm maintains a sufficient amount of resources that can credibly and feasibly be used to absorb losses and recapitalise the firm to a level that enables it to continue to comply with the conditions for regulatory authorisation and sustain market confidence. The MREL resources would be the first liabilities to be subject to bail-in, following the order of loss absorption set out in the Banking Act; see paragraph 2.16 below. In the very extreme scenario that the level of losses and recapitalisation needs exceed the available MREL, the Bank has the power to bail-in other liabilities. The Bank calibrates MREL as the sum of a loss absorption amount, to absorb losses suffered by the firm, and a recapitalisation amount. For bail-in firms – including the UK G-SIBs, D-SIBs and certain medium-sized firms – the recapitalisation amount of MREL is set equal to minimum capital requirements.^{footnote [9]}

1.7 In the Bank of England's Approach to Assessing Resolvability Statement of Policy (RAF SoP), Annexes 1 and 2 include an indicative stylised resolution timeline (Figure 1), which provides an illustration of how the Bank anticipates a bail-in resolution may be conducted.

Figure 1: Stylised resolution timeline

1.8 This timeline should help firms understand the capabilities and arrangements they will need to have in place to enable them to be considered resolvable. To be considered resolvable, firms must, as a minimum, be able to achieve these outcomes:

1. have adequate financial resources in the context of resolution;
2. be able to continue to do business through resolution and restructuring; and
3. be able to coordinate and communicate effectively within the firm and with the authorities and markets so that resolution and subsequent restructuring are orderly.

1.9 The Bank endeavours to give itself sufficient time to contingency plan and generally aims, if possible, to have three months in which to undertake planning. In practice, however, the amount of time available for contingency planning will vary – for example, depending on the nature of the difficulties being experienced and the actions to recover being taken by the firm.

1.10 To support market understanding and to provide a greater degree of transparency of how the Bank might conduct a bail-in in practice we set out a stylised bail-in timeline (Figure 2).

1.11 Whilst this operational guide is intended to be a standalone document, it is not intended to provide a comprehensive overview of all aspects of a bail-in resolution. Where further information is required, users should consult the Bank’s:

• Approach to resolution
• Statement of Policy: Approach to setting a minimum requirement for own funds and eligible liabilities (MREL) (MREL SoP)
• Statement of Policy: Approach to Assessing Resolvability (RAF SoP)
• Statement of Policy on valuation capabilities to support resolvability (Valuations SoP)

1.12 HM Treasury (HMT) has also published a Special Resolution Regime (SRR) Code of Practice which provides guidance as to how, and in what circumstances, the authorities (the Bank, the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA) and HMT) will use the stabilisation powers, including the bail-in power. As set out in the SRR Code of Practice, HMT has sole responsibility for authorising the use by the Bank of any stabilisation power which would have implications for public funds.^{footnote [10]}

Figure 2: Stylised bail-in timeline

1.13 Annex 1 of this document contains draft Template Resolution Instruments (the ‘Template Resolution Instruments’), including:

• Bail-in Resolution Instruments, one of which would be made by the Bank at the point of entry into resolution. A Bail-in Resolution Instrument would formally place the firm in resolution and contain actions to give effect to the bail-in including the creation of interim rights for creditors affected by the bail-in. The annex includes templates that illustrate alternative ways in which we may choose to confer these interim rights:
  • a Bail-in Resolution Instrument that contains actions to give effect to the creation and issuance of Certificates of Entitlement (CEs);
  • a Bail-in Resolution Instrument that alternatively contains actions to give effect to the creation of Potential Rights to Onward Property or Proceeds (PROPPs);
  • a Bail-in Resolution Instrument that contains actions to give effect to a bail-in of a building society involving its demutualisation, whilst creating PROPPs.^{footnote [11]}
• Bail-in Supplemental Resolution Instruments which would be made by the Bank when the Bank has quantified the level of recapitalisation required for the firm in resolution, can determine the Allocation Ratio for shares in the firm, and is ready to start the process for delivery of shares. The annex includes templates that illustrate alternative ways in which the Bank may give effect to this, depending on the approach taken to interim rights:
  • a Bail-in Supplemental Resolution Instrument (Certificates of Entitlement);
  • a Bail-in Supplemental Resolution Instrument (PROPPs).
• Bail-in Onward Transfer Instruments which would be made by the Bank to give effect to the transfer of shares (or other relevant compensation) to the relevant beneficiaries. Depending on the allocation timeline, the transfer may take place in a single transfer to all relevant beneficiaries or in ‘tranches’ to groups of relevant beneficiaries. In the latter case, more than one Bail-in Onward Transfer Instrument would be made. The annex includes templates that illustrate alternative ways in which the Bank may give effect to the transfer of shares to the relevant beneficiaries, depending on the approach taken to interim rights:
  • a Bail-in Onward Transfer Instrument (Certificates of Entitlement);
  • a Bail-in Onward Transfer Instrument (PROPPs).

1.14 In the pre-resolution contingency planning period for a resolution, the Template Resolution Instruments would be a useful starting point for the preparation of the instruments and other documents required for the bail-in. The Bank would tailor the Template Resolution Instruments to reflect the specific case, the powers to be exercised and a range of other factors. For the reasons noted below, the Bank may depart from the approach in the Template Resolution Instruments where it considers it to be appropriate in the circumstances of a particular case.

1.15 There are many other actions that will need to take place during a resolution, including valuations, restructuring planning and communications with stakeholders. This document refers to these actions where directly relevant to the legal means by which bail-in may be exercised, which we refer to as the ‘bail-in mechanic’. It is not intended to provide a comprehensive overview of all aspects of resolution by bail-in. Firms should refer to the RAF SoP for further information on the capabilities the Bank expects firms to have to remove barriers to resolvability.

1.16 A bail-in of a UK firm, especially a G-SIB or other large international firm, is likely to require extensive cross-border co-ordination, including with host resolution authorities and any relevant Crisis Management Group. This document does not address those interactions, but they will be a vital component of a successful resolution of such a firm.

1.17 The bail-in tool was introduced into the United Kingdom in 2013.^{footnote [12]} At the time of publication, the Bank has not used the bail-in tool. Indeed, because it is an innovation only introduced after the 2008 global financial crisis, instances of bail-in of banks anywhere in the world are rare, and different jurisdictions may of course legitimately take different approaches to the execution of a bail-in to that outlined in this document.^{footnote [13]} This document is intended to increase awareness and understanding of the actions that may take place in a bail-in resolution in the United Kingdom. At the same time, in light of the fact that bail-in is a crisis management tool, the Bank must be able to retain full discretion as to how to respond to the circumstances of a particular case. Accordingly, any use of the bail-in tool will depend on the facts and circumstances of the particular case at the time, and may be different from the actions and approach set out in this document and the Template Resolution Instruments.

1.18 If you wish to contact the Bank of England regarding this publication, the Template Resolution Instruments or any other aspects of bail-in, please email: Enquiries@bankofengland.co.uk.

2: Pre-resolution contingency planning

2.1 There are many steps involved in conducting a bail-in. A number of these must be performed before a firm is placed into resolution.

2.2 Ahead of any resolution action, the relevant authorities must undertake an assessment to determine whether the conditions for a firm to be placed into resolution are met. The four general conditions which must be satisfied are contained in section 7 of the Banking Act.^{footnote [14]}

2.3 In addition, the Bank expects to appoint an independent valuer^{footnote [15]} to carry out a valuation of the assets and liabilities of the firm for the purpose of informing the decisions to be taken by the Bank and PRA, including the assessments as to whether the firm is failing or likely to fail and the level of recapitalisation required.^{footnote [16]}

2.4 The Bank will also take a number of other actions related to the overall resolution including:

• engaging with relevant UK authorities and host resolution authorities (including through the firm’s Crisis Management Group);
• communications planning, to prepare for communications with a range of stakeholders once resolution has been entered;
• determining any changes to the firm’s management upon entry into resolution; and
• any preparations related to the resolution liquidity framework.^{footnote [17]}

These are not described further in this document, but will be important components of any resolution.

2.5 For a resolution by bail-in, a key action will be to determine the instruments and liabilities that may be cancelled, transferred, diluted, written down and/or converted into equity in the bail-in and their relevant features. For example, in relation to each instrument: its International Securities Identification Number (ISIN); currency of denomination; whether it is admitted to trading, and if so where and on which exchanges trading takes place; the relevant central securities depositories (CSDs) and/or international central securities depositories (ICSDs) (ie Euroclear Bank and Clearstream) on which trades are settled; its status in the creditor hierarchy in an insolvency of the firm; its governing law; and any contractual bail-in recognition provisions. The Bank gathers this information on instruments that may be subject to bail-in.^{footnote [18]}

2.6 During the pre-resolution contingency planning stage, the Bank will determine the structure of the bail-in to be conducted. The Bank’s bail-in mechanic involves the creation of interim rights for affected creditors in the period between the firm entering resolution and the eventual provision of shares (or other compensation) at the conclusion of the bail-in. From the commencement of resolution, the trading and settlement of instruments that are subject or potentially subject to bail-in will be suspended.

2.7 To best meet the special resolution objectives during a bail-in, including enhancing financial stability and public confidence, the Bank has options as to how it may structure interim rights. These include the creation of:

• Certificates of Entitlement (CEs): CEs are interim securities allocated to affected creditors’ securities accounts. They represent the potential right to compensation in the form of either equity shares in the failed firm or the net cash proceeds of the sale of equity shares. The CEs will be held in CSD/ICSD securities accounts and will be capable of being traded.
• Potential Right to Onward Property or Proceeds (PROPPs): PROPPs are contingent beneficial interests that represent affected creditors’ potential rights to compensation in the form of either equity shares in the failed firm or the net cash proceeds of the sale of equity shares. PROPPs will not be transferable or capable of being traded, will not be held in securities accounts with CSDs/ICSDs, and will not be represented by any form, instrument or certificate. PROPPs have been designed to comply with U.S. securities registration requirements. The U.S. Securities and Exchange Commission has published a No-Action Letter indicating they would not bring forward enforcement action where a bail-in is conducted consistent with that letter.

Certificates of Entitlement:

2.8 Under the Bail-in Resolution Instrument, CEs will be deemed to be issued by and in the name of the firm; and the firm will be required to take all necessary actions in connection with the creation of the CE programme. The Bail-in Resolution Instrument will also contain the conditions applicable to the CEs. CE-holders will not have any entitlement to interest or dividends. The CEs will be capable of being traded and are therefore expected to conform to the UK’s Uncertified Securities Regulations 2001. CEs will not be listed on an exchange. Depending on the circumstances, which may include a scenario where preparation time was extremely limited, the Bail-in Resolution Instrument could provide for CEs to be delivered to affected creditors in a future date specified in the Instrument, shortly after entry into resolution.

2.9 Depending on the circumstances, including the extent of losses estimated at the failed firm, the Bank may determine that CEs will not be created for and issued to AT1 and T2 holders. The Bank expects that the entire share capital of the firm would be required to compensate bailed-in creditors according to their position in the creditor hierarchy. Therefore, the Template Bail-in Resolution Instruments do not provide for CEs to be issued to existing shareholders or for existing shareholders to become PROPP beneficiaries.

2.10 CEs will be divided into various classes corresponding to the particular category of liabilities subject to bail-in, as determined by the ranking such liabilities would have in an insolvency of the firm. CEs will not be issued in certificated form and CEs of each class will be represented by a master certificate of entitlement in registered form. Accordingly, interests in CEs will need to be held through accounts with a recognised CSD/ICSD. Where practicable, Euroclear United Kingdom and International (EUI) is expected to be the issuer CSD for the CEs. It will be necessary to coordinate with relevant CSDs/ICSDs to reflect holdings of CEs through any linked account, which they maintain with the issuer CSD. An Allocation Adviser would most likely be appointed to advise and assist on the CE programme.

2.11 Each of the persons shown in the relevant CSD/ICSD as being entitled to an interest in CEs will need to look solely to that clearing system in relation to all rights arising under or in respect of the CEs except where otherwise expressly provided by the Bail-in Resolution Instrument or any Bail-in Supplemental Resolution Instrument or Bail-in Onward Transfer Instrument. Transfers of interests in CEs within the relevant CSD/ICSD will be in accordance with its respective rules and operating procedures and CE-holders must rely on the procedures of the relevant clearing system with respect to such matters.^{footnote [19]}

2.12 The firm in resolution will be required to undertake a number of ancillary actions in connection with the issue of CEs. For example, it will be required to execute the Master CE for each class of CEs, deliver the Master CEs to the nominated common depositary/safekeeper and enter into agreements with the CE registrar, depositary for the equity shares (which may be a third party), and custodian. The Bank will identify third parties who will take on these various roles, and prepare and agree the related documentation during the pre-resolution contingency planning stage.

Potential Rights to Onward Property or Proceeds (PROPPs)

2.13 To respond to operational risks during execution, including a scenario where preparation time was extremely limited, the Bank may alternatively create interim rights in the form of PROPPs. PROPPs are contingent beneficial interests created by the Bail-in Resolution Instrument for the benefit of affected creditors, based on holdings of bail-in liabilities at the point of resolution. This provides affected creditors with legal clarity on their treatment and potential entitlement to compensation at the conclusion of the bail-in process.

2.14 Bailed-in creditors, regardless of the immediate treatment of their bail-in liabilities, would become PROPP beneficiaries by operation of the Bail-in Resolution Instrument. Unlike CEs, interests in PROPPs would not be transferable and will not be represented by any certificate or instrument. PROPP beneficiaries will not have any entitlement to interest or dividends. The PROPP beneficiaries will be divided into various classes corresponding to the particular category of liabilities which they held which are subject or potentially subject to bail-in, as determined by the ranking such liabilities would have in an insolvency of the firm.

2.15 Operationally, the creation of PROPPs is likely to be more straightforward relative to the creation and issuance of CEs for the Bank, failed firm and other relevant stakeholders. For example, PROPP beneficiaries will not be able to hold their interests through accounts with a CSD/ICSD. The failed firm may nevertheless be required to undertake any necessary actions in connection with the creation of PROPPs, including supporting the Bank and Allocation Adviser (see Figure 4 below) in delivering shares to PROPP beneficiaries in the Allocation Period (see Section 4). Although interests in PROPPs cannot be held with a recognised clearing system, coordination with CSDs and ICSDs may also be required to establish the beneficiaries of PROPPs at the point of resolution.^{footnote [20]}

Figure 3: Simplified example of treatment of instruments upon entry into resolution

Figure 4: Example overview of key parties involved in a bail-in

Footnotes

• Notes: This figure provides a simplified overview of parties that may be operationally involved in a bail-in. In practice, there may be more than one of each type of entity, eg multiple stock exchanges or trading venues on which the firm’s instruments are available for trading.
• The Allocation Adviser may be appointed by the Bank and the firm for overall advice and support in connection with any CE programme and to assist with arranging the delivery of shares or other compensation to holders of CEs or PROPP beneficiaries, as applicable, during the Allocation Period.
• The Bail-in Administrator is appointed by the Bank, may be appointed to control the voting rights in respect of the shares in the firm transferred to the Depositary Bank and oversees the restructuring process.
• The Depositary Bank may be appointed by the Bank and/or the firm. Shares may be transferred to the Depositary Bank and held on behalf of their beneficial owners, but voting rights will be controlled by the Bail-in Administrator. Alternatively, the shares (and potentially other bail-in liabilities of the firm) may be transferred to a CREST account maintained by the Bank. In these cases, the Bank would act as custodian for the shares and bail-in liabilities and hold them on behalf of beneficial owners for the bail-in period.
• Common depositaries/safekeepers, appointed in respect of the issue of securities to investors and which interface with the relevant CSDs/ICSDs.
• The CE common depositary/safekeeper assists with the issuance of CEs and interfaces with the relevant CSDs/ICSDs.
• The National Numbering Agency issues ISINs, CFIs and FISNs (see Glossary) for instruments issued by the firm, including CEs in resolution.
• Firms often issue securities through CSDs which, as operators of securities settlement systems, enable transactions in the securities to be managed through book entry in its systems on behalf of its account holders and which provides services such as corporate actions processing. Firms may have also issued securities via an ICSD. In a bail-in, the CSD/ICSDs will need to take a number of actions to give operational effect to the bail-in, including suspending settlement of relevant securities and allocating CEs to relevant bondholder accounts.
• The firm’s shares and other instruments may be admitted for trading on a stock exchange or other trading venue. These will be regulated by the relevant market authority, with which the Bank would co-ordinate. The trading venue and market authority may need to take a number of actions to give operational effect to the suspension of trading of relevant securities.
• Registrars maintain an ongoing record of the firm’s shares and, where debt securities have been issued in registered form, of the holders of the relevant debt instruments. A registrar would also maintain records of CEs.
• Issuing and paying agents (IPAs) appointed by the firm in connection with issues of debt securities provide various services on behalf of the firm (eg, fiscal and principal paying agents).

2.16 The determination of the classes of interim rights, corresponding to different categories of bailed-in liabilities, will depend on a number of factors such as the ranking in the creditor hierarchy in an insolvency of the liability to be bailed-in (see Table A) and the precise structure of the bail-in. In order to streamline the process, the Bank may structure interim rights such that each class will correspond to a particular category of liabilities subject or potentially subject to bail-in determined by the ranking such liabilities would have in an insolvency of the firm (rather than, for example, corresponding to a specific issuance of securities subject or potentially subject to bail-in). The Template Bail-in Resolution Instruments contain a number of possible bail-in structures that could be used in respect of bail-in liabilities.^{footnote [21]} Different classes of interim rights will allow for different Allocation Ratios to be set once final valuations are completed, which will enable appropriate loss absorption and compensation levels to be set.^{footnote [22]}

2.17 The various liabilities that could be subject to bail-in may have a range of different characteristics in addition to their ranking in the creditor hierarchy in insolvency, including different minimum denominations and being denominated in different currencies.^{footnote [23]}

2.18 Section 12AA of the Banking Act requires the Bank to use its powers when exercising the bail-in stabilisation option in a way which ensures that losses are borne in the following order:

• Existing Common Equity Tier 1 (CET1) instruments, which must be cancelled, transferred or severely diluted so as to ensure losses are borne first by the holders of such instruments.
• Additional Tier 1 (AT1) instruments, the principal amount of which must be reduced or converted (directly or indirectly) into CET1 instruments (or both) to the extent of the capacity of such AT1 instruments.
• Tier 2 instruments, the principal amount of which must be reduced or converted (directly or indirectly) into CET1 instruments (or both) to the extent of the capacity of such Tier 2 instruments.
• Subordinated debt which is not AT1 instruments or Tier 2 instruments, the principal amount of which must be reduced or converted (directly or indirectly) into shares or other securities or both reduced and so converted in accordance with the hierarchy of claims in normal insolvency proceedings, by the difference between the aggregate of the reduction or conversion of the AT1 instruments and the Tier 2 instruments and the shortfall amount^{footnote [24]} or to the extent of the capacity of such subordinated debt, whichever is lower. In addition, the holders of shares of the firm that are not CET1, AT1 or Tier 2 are required to bear losses in accordance with the hierarchy of claims in normal insolvency proceedings.
• Remaining bail-in liabilities (ie liabilities and capital instruments that do not qualify as CET1 instruments, AT1 instruments, Tier 2 instruments or subordinated debt of the firm and are not excluded liabilities under section 48B(8) of the Banking Act), the principal amount of which, or any outstanding amount payable in respect of which, must be reduced or converted (directly or indirectly) into shares or other securities, or both reduced and so converted, in accordance with the hierarchy of claims in normal insolvency proceedings, by the difference between the aggregate of the reduction or conversion of the AT1 instruments, the Tier 2 instruments, the subordinated debt and such other shares of the firm and the shortfall amount or to the extent of the capacity of such remaining bail-in liabilities, whichever is lower.^{footnote [25]}

2.19 Certain classes of liabilities, such as FSCS covered deposits, client assets, certain liabilities arising from participation in designated settlement systems or recognised central counterparties, certain liabilities related to salary and pensions, etc. are excluded from bail-in by law.^{footnote [26]} Certain other liabilities may also be excluded, in whole or in part, if the Bank considers that exclusion is justified on the grounds set out in section 48B(12) of the Banking Act. Where this is the case, these categories of excluded liabilities will be set out in the Bail-in Resolution Instrument. Such exclusions may result in greater losses being borne by certain other categories of creditors.

2.20 Where CEs are created in the bail-in, it is possible to structure their nominal value or minimum denomination in various ways. It is proposed that each CE will have a nominal value of £1 and that a bailed-in creditor will receive a number of CEs equal to the aggregate principal amount of such bailed-in creditor’s liability that is written down or converted. It is not envisaged that PROPPs will have a nominal or minimum denomination.

2.21 An individual creditor may hold multiple classes of bailed-in securities in a firm at the point of resolution. For example, the creditor may hold multiple issues of Tier 2 instruments and multiple issues of other eligible liabilities of the firm in resolution. It is expected that a single class of interim rights (either CEs or PROPPs) will be created corresponding to all bailed-in liabilities having the same ranking in the creditor hierarchy in normal insolvency proceedings. For example, there would be one class of CEs or PROPPs corresponding to all AT1 Instruments and one class of CEs or PROPPs corresponding to all Tier 2 instruments. In this case a creditor holding multiple classes of bailed-in liabilities having different rankings in normal insolvency proceedings would be entitled to multiple classes of CEs or would be a beneficiary in respect of multiple classes of PROPPs. If there is a need to treat bailed-in liabilities that have the same ranking differently, a class of interim rights could be created corresponding to each separate class of bail-in liability issued.

2.22 The Template Bail-in Resolution Instruments provide for the shares in the firm to be transferred from the existing shareholders at the point of resolution to the Depositary to be held on trust. This may be a Depositary Bank appointed by the Bank and/or the firm. Alternatively, the shares (and potentially other bail-in liabilities of the firm) may be transferred to a CREST custody account maintained by the Bank itself. In this case, the Bank would act as custodian for the shares (and any other bail-in liabilities transferred) and hold the securities on trust for the bail-in period. At the end of the Allocation Period, these shares would be allocated to relevant CE-holders or PROPP beneficiaries, or be sold and the net proceeds of the sale allocated to relevant CE-holders or PROPP beneficiaries, as applicable.

2.23 In addition to actions required to support the creation of interim rights (ie CEs or PROPPs), the firm will need to maintain all continuing applicable issuer eligibility requirements in the relevant CSDs and ICSDs. Since in resolution the listing of the firm’s shares and certain debt securities will likely be suspended but not necessarily cancelled, the applicable continuing obligations under the relevant listing rules in the jurisdiction of the exchanges on which those securities are listed will continue to apply to the firm, including applicable disclosure requirements. The disclosure obligations under the UK Market Abuse Regulation (UK MAR)^{footnote [27]} and the Listing Rules and Disclosure Guidance and Transparency Rules of the FCA applicable to the firm’s UK listed securities will also be relevant in the pre-resolution contingency planning stage. It remains the firm’s responsibility to ensure compliance with these obligations at all times, both before and after the commencement of resolution. The Public Offers and Admissions to Trading Regulations (POATRs) became effective in January 2026. This introduced an explicit exemption from the requirement to produce a prospectus for an offer to the public of securities resulting from the conversion or exchange directly or indirectly of other securities, own funds or other liabilities under the special resolution provisions of the Banking Act.

2.24 The firm is also solely responsible for any decision to delay disclosure of inside information under Article 17(4) of UK MAR, or to seek the consent of the FCA to a delay in disclosure under Article 17(5) of UK MAR. Under Article 17(4) a firm is permitted to delay disclosure of inside information if immediate disclosure is likely to prejudice the legitimate interests of the firm, delay would not be likely to mislead the public, and the firm is able to ensure the confidentiality of the information. If a firm has delayed the disclosure of inside information under Article 17(4), it must notify the FCA that disclosure of the information was delayed immediately after the information is disclosed to the public. Upon request of the FCA, the firm must provide a written explanation of how the applicable conditions were met. Under Article 17(5), in order to preserve the stability of the financial system, a firm may on its own responsibility delay the public disclosure of inside information where the following conditions are met:

1. the disclosure of the inside information entails a risk of undermining the financial stability of the issuer and of the financial system;
2. it is in the public interest to delay the disclosure;
3. the confidentiality of that information can be ensured; and
4. the FCA has consented to the delay on the basis that the conditions in (a) to (c) are met.

2.25 The Bank and FCA would liaise closely in circumstances where a request has been made by a firm to the FCA to delay disclosure of inside information.^{footnote [28]}

2.26 Other actions undertaken in the pre-resolution contingency planning period include identifying a BiA and determining the scope of their role, including in relation to the business reorganisation plan (see Box B).

2.27 The Bank is also likely to be engaging on a confidential basis with a number of external parties in preparation for the bail-in. To execute the bail-in, the Bank will liaise with market infrastructures including CSDs and ICSDs, registrars and stock exchanges, where relevant a Depositary Bank for holding the shares of the resolved firm during the bail-in period and, where relevant an Allocation Adviser to administer the CE programme; and to support the Bank in the execution of the bail-in (see Figure 4).

Table A: Insolvency creditor hierarchy ^(a)

3: The resolution weekend

3.1 If the Bank, in consultation with other relevant authorities, has determined that the resolution conditions have been met and is satisfied that the use of the bail-in stabilisation option is in the public interest and that action is necessary to advance the resolution objectives set out in the Banking Act, the Bank can trigger resolution.

3.2 Once the Bank has decided to place a firm into resolution, it will make a Bail-in Resolution Instrument, which it is obliged to publish as soon as is reasonably practicable after making the instrument. The making of the Bail-in Resolution Instrument, the time at which it is to come into force and the measures provided for in the Bail-in Resolution Instrument would be announced by the Bank; and the Bail-in Resolution Instrument would be published at the same time. The firm in resolution would also be expected to make an announcement at the same time. The final preparations for resolution and the making of the Bail-in Resolution Instrument are likely to take place over a weekend, sometimes informally referred to as the ‘resolution weekend’, although the necessary actions can take place at any time if the circumstances so require.

3.3 The Bail-in Resolution Instrument initiates the resolution, identifies the instruments and liabilities subject to the bail-in and specifies what is to happen to these upon entry into resolution (the ‘Resolution Time’, which will be specified in the Instrument). The affected securities will be listed by ISIN (or other relevant identifier) in the Bail-in Resolution Instrument or other accompanying documents. Under section 48Z of the Banking Act, the exercise of stabilisation powers by the Bank of England should be disregarded in determining whether a default event provision has occurred.

3.4 By the Bail-in Resolution Instrument, the title to all existing ordinary shares will be transferred to the Depositary, at nil consideration to the shareholders. The BiA or the Bank, as appropriate, will exercise full control of the firm in resolution. Therefore, all voting rights attached to ordinary shares will be exercisable during the bail-in period by the BiA or the Bank, as provided for in the Bail-in Resolution Instrument. It is expected that any Depositary Receipt programmes, including American Depositary Receipts, would be unwound and extinguished in full.

3.5 The Bail-in Resolution Instrument will write down and cancel in full all preference shares and all AT1 and Tier 2 instruments of the firm. These instruments would be removed from the relevant CSDs/ICSDs and trading venues in accordance with their normal rules and procedures for cancelled securities. Any UK listings of these securities will be cancelled.^{footnote [32]}

3.6 The Bail-in Resolution Instrument will also:

• bail-in, or announce the proposed bail-in of, bail-in liabilities;^{footnote [33]}
• create each class of interim rights;
• specify the treatment of coupon and principal payments in respect of bail-in liabilities during the bail-in period;
• effect suspensions as applicable of the UK listings of the shares and the uncancelled bail-in liabilities in the form of securities (see below);
• appoint the BiA (see Box B);
• specify the arrangements for drawing up the business reorganisation plan;
• if necessary, give directions to, and/or remove, directors of the firm in resolution; and
• specify the actions to be taken by the relevant CSDs, ICSDs, registrars, common depositaries/safekeepers and others.

3.7 The treatment of eligible liabilities and any other bail-in liabilities^{footnote [34]} will depend on the way in which the bail-in is structured, which the Bank will determine having regard to the circumstances of each case. This may include:

• writing down those bail-in liabilities in part or in whole at the commencement of the resolution;
• an immediate write-down in part of those bail-in liabilities with the possibility of a further write-down at a later stage once the independent equity valuation has been completed;
• the identification of bail-in liabilities which are to be bailed-in in whole or in part and the transfer of such bail-in liabilities to the Depositary with the write-down taking place in a single stage once the independent equity valuation has been completed (referred to as a ‘deferred bail-in’); or
• a combination of such approaches.

3.8 One of the main inputs to the decision on how to structure the bail-in in respect of shares, capital instruments and bail-in liabilities will be the valuation data available to the Bank. The Bank is required to obtain an independent valuation of the assets and liabilities of the firm before it exercises stabilisation powers. The Bank may carry out a provisional valuation of a firm’s assets and liabilities where it considers it sufficiently urgent to make that appropriate.^{footnote [35]}

3.9 The broad purpose of these valuations is to inform the decisions as to whether the conditions for the exercise of the stabilisation power are satisfied, the resolution tools to be applied and the extent to which shares, capital instruments and bail-in liabilities should be cancelled, transferred, diluted, written down and/or converted to ensure that the extent of losses is appreciated upon entry into resolution.

3.10 The valuation of the firm’s assets and liabilities, on a hold value or disposal value basis, for the purposes of determining the necessary write-down, conversion, cancellation, dilution or transfer, and informing the firm’s restructuring plan is referred to as ‘Valuation 2’.^{footnote [36]} The Bank will need to take into account the recapitalisation needs of the firm to comply with the conditions for authorisation and command market confidence, both immediately after the resolution weekend and through the post-resolution restructuring period.

3.11 In some circumstances, the Bank may decide to apply a deferred bail-in, where bail-in liabilities are not written down at the start of the resolution. In these cases, the trading and settlement in relevant liabilities would remain suspended during the bail-in period, with the write-down being determined at a later point in the bail-in period. In such a circumstance, the amount of the bail-in would be quantified once the final valuation is available. If the bail-in is structured in this way and CEs are issued, a separate class of CEs for each class of bail-in liabilities in the form of securities would be created. This is because if the bail-in liabilities are written down in part, on the exchange of the CEs issued in exchange for such instruments, holders of the CEs may receive both shares and partially written down bail-in liabilities. This option is provided for in the Template Bail-in Resolution Instrument (Certificates of Entitlement).

3.12 It is expected that any accrued but unpaid interest in respect of securities which have been bailed-in at the point of entry into resolution would be written down and cancelled by the Bail-in Resolution Instrument. The Bail-in Resolution Instrument would also be likely to provide for the suspension of interest accrual on all bailed-in liabilities that have not been written down and cancelled in their entirety for the duration of the bail-in period.

3.13 The Bail-in Resolution Instrument would have direct effect in respect of the shares of the firm and all liabilities subject to bail-in which are governed by English law. In the case of such liabilities governed by the law of another country, there will be reliance on either contractual recognition of bail-in,^{footnote [37]} and/or recognition of the Bank’s resolution actions by authorities in the relevant jurisdictions.

3.14 The listing and/or trading of instruments subject to bail-in (where they are not cancelled) will be suspended and the Bank will co-ordinate with the FCA and the relevant exchanges on this.^{footnote [38]} In most cases, the suspension of listing and/or trading can be effected quickly and potentially intraday, though it would be preferable to do this overnight or over a weekend (ie outside of market opening hours). While listing is suspended, the firm will be required to comply with the continuing obligations for a listed company, including all listing rules and disclosure obligations throughout the bail-in period.

3.15 Settlement of bailed-in securities (which have not been cancelled in their entirety) will also be suspended and the relevant instruments will be immobilised within the relevant CSD/ICSD accounts during the bail-in period. It is anticipated that the relevant beneficiaries of interim rights will be established on the basis of holders of bailed-in instruments at the point of entry into resolution (ie ‘Resolution Time’). Any transactions that are ‘in-flight’^{footnote [39]} at the point of entry into resolution will be treated in accordance with the CSD’s settlement finality rules and arrangements; though in some circumstances intraday suspensions can take immediate effect, meaning unsettled transactions would remain in an immobilised status. Suspensions may affect not only normal settlement, but also collateral operations and lending and borrowing.

3.16 The Bail-in Resolution Instrument will contain instructions to be followed by parties such as CSDs, common depositaries/safekeepers, issuing and paying agents, and registrars to implement the resolution actions in respect of relevant securities. The Bank will co-ordinate with relevant CSDs on a confidential basis in the run up to a resolution. This will include Euroclear UK & Ireland, the ICSDs, and other CSDs such as the Depository Trust Corporation.^{footnote [40]} Where relevant bailed-in instruments are held in multiple CSDs, the exact treatment and sequence of actions will depend on the particular circumstances. However, in general, it is common practice for investor/linked CSDs to follow actions undertaken by the primary issuer CSD for a particular security.

3.17 Where CEs are to be issued, the appropriate CSDs will be directed to credit CEs of the relevant class to the securities accounts held with them by the creditors whose securities have been subject to bail-in.

4: The bail-in period

4.1 The next stage of a bail-in covers the period after the Resolution Time and the initial resolution actions, up to completion of the allocation of shares and/or other compensation. The Bank anticipates that this period would typically last no more than six months. In practice, however, this period would last as long as necessary for the Bank to robustly calibrate the final terms of the bail-in and return the firm to private control. Depending on the complexity of the case, the period could therefore last longer than six months. The updated valuations and business reorganisation plan will inform the decision on the extent of write-down, dilution or cancellation of bailed-in liabilities.

4.2 One of the inputs relevant to this assessment will be the business reorganisation plan. A firm must produce a business reorganisation plan within one month of entry into resolution. The plan should:

• address the causes of failure;
• enable the firm to return to a viable business model that is sustainable in the long-term;
• enable the firm to return to fulfilling relevant regulatory requirements on a forward-looking basis; and
• support the achievement of the Bank’s statutory resolution objectives, in particular by ensuring the continuity of banking services and critical functions in the UK.

4.3 This plan may involve some parts of the business being wound down or sold as well as a possible restructuring of some or all of the remaining business. Depending on the circumstances, the Bank will decide whether the BiA or one or more directors of the firm in resolution, possibly in conjunction with the BiA, will produce the business reorganisation plan during this period. The Bank, in consultation with the PRA and the FCA, will approve the plan if satisfied that it is appropriately designed to meet the objective of restoring the viability of the firm.

4.4 Once final valuations have been completed, the Bank will announce the terms on which CE-holders, or PROPP beneficiaries, are entitled to equity or cash compensation.

4.5 If CEs have been issued, these terms will include the Allocation Ratio of CEs for shares in the firm (and possibly other assets) for each class of CEs and the timetable for the allocation, including the Allocation Record Date, ie the time and date at which holders of CEs will be potentially eligible to receive shares (or other compensation).

4.6 If PROPPs have been created, these terms will include the Allocation Ratio of bailed-in securities for shares (or other compensation) that each class of PROPP beneficiary is entitled to. It will also include the timetable for the delivery of shares or other compensation to relevant PROPP beneficiaries.

4.7 The Allocation Ratio for a class of CE-holders or PROPP beneficiaries may be zero. The compensation due and timetable for the delivery of compensation will be contained in and announced through a Bail-in Supplemental Resolution Instrument made by the Bank.

4.8 In cases of deferred bail-in, ie where the Bank does not write down bail-in liabilities at the start of the resolution, the Bail-in Supplemental Resolution Instrument will give effect to the terms of the write-down and/or cancellation of these liabilities. In these cases, the CEs of the relevant class which were issued at the start of the resolution will represent an entitlement to any residual principal amount of such bailed-in liabilities as well as any shares to which holders of such class of CEs may be entitled and this will be reflected in the relevant Allocation Ratio for such class of CEs.

4.9 In a case where an immediate bail-in of bail-in liabilities took place at the commencement of the resolution, but during the bail-in period the level of losses to be absorbed and the recapitalisation needs have been found to be greater than estimated immediately prior to the start of the resolution by updated or revised valuations, a subsequent additional write-down of bail-in liabilities may be required. The Bail-in Supplemental Resolution Instrument would effect this further write-down, and set out the terms of the further write-down and cancellation. If CEs have been issued, the relevant amount will be converted into further CEs of the relevant class. If PROPPs have been created, the entitlement of the beneficiaries would be adjusted.

4.10 The Allocation Ratios will enable the calculation of the fractional entitlement to shares to which relevant beneficiaries will be entitled. The Allocation Ratios will be determined by a number of factors, including that losses should be borne in accordance with the order of priority of the corresponding bailed-in liabilities under normal insolvency proceedings; and the principle that the Allocation Ratios should be set such that no preference shareholder or creditor is expected to receive worse treatment than they would have received in an insolvency of the firm in resolution (the ‘no creditor worse off’ safeguard).

Figure 5: Simplified example of treatment of instruments at the end of the bail-in period ^(a)

Footnotes

• (a) The example is purely illustrative and is not intended to provide a guide as to which classes of CE-holders may receive shares at the end of the bail-in period.

4.11 The Bank expects to allocate the highest quality of capital ie CET1,^{footnote [45]} in the form of the ordinary shares which have been transferred to, and are held on trust by, the Depositary. However, in some circumstances it may be appropriate for relevant beneficiaries to receive compensation in other forms, such as an amount equal to the net proceeds generated from the sale of shares where relevant.

4.12 The announcement of the Allocation Ratios will mean relevant beneficiaries will be able to assess more accurately the value of the compensation they will be entitled to. Relevant beneficiaries are expected to notify the regulator if the number of shares that they are entitled to will exceed the ‘controller’ thresholds as defined in section 422 of FSMA 2000. They should provide that notification by following the instructions for submitting a change in control application on the relevant regulator’s website.^{footnote [46]} In case the relevant beneficiary does not submit a notification and as a consequence the change in control is not assessed by the relevant regulator before the determination of entitlements and delivery of shares, the PRA may decide to withhold the voting rights of the relevant beneficiary under section 191B of FSMA 2000 until the assessment is complete.

4.13 Where used, CEs will remain tradable for a short period to be specified in the Bail-in Supplemental Resolution Instrument, should the holder wish to dispose of their CEs rather than exchange them. Once this period has elapsed and final transactions settled, the CEs will cease to be tradable and will be frozen in the securities accounts of the holders of such CEs at the relevant CSD(s) on the Allocation Record Date at the end of such period. PROPPs will not be transferable.

4.14 To best meet the special resolution objectives during the bail-in period, including enhancing financial stability and public confidence, the Bank has a number of options as to how to structure the ‘Allocation Period’ where shares or other compensation are provided to relevant beneficiaries:

• Direct delivery of shares: Shares will be delivered directly to the securities accounts of all relevant beneficiaries with the support of the CSDs and Allocation Adviser on a date specified by the Bank. If PROPPs were created, shares would be allocated based on relevant beneficiaries’ holdings of bailed-in securities at the point of entry into resolution. Shares will be credited to the securities account in which the relevant PROPP beneficiary held the bailed-in securities.^{footnote [47]} If CEs were created, shares would be allocated based on relevant beneficiaries’ holdings of CEs as at the Allocation Record Date. If custodian chains are relevant, shares will be allocated by the CSD/ICSD systems to the relevant custodian account in accordance with the usual procedures acceptable to the relevant CSDs.
• Statements of Beneficial Ownership (SBOs): To receive compensation, relevant beneficiaries could be required to submit an SBO that confirms their right to receive compensation and provides other relevant information to the Bank and Allocation Adviser. When a sufficient majority of relevant beneficiaries have submitted SBOs, share compensation will be delivered to the clearing accounts of those beneficiaries who have come forward, with the support of the CSDs and Allocation Adviser. Where a relevant beneficiary has submitted a SBO but is ineligible to receive shares, the shares would be sold, and an amount equal to the net proceeds of the sale would be transferred to the relevant beneficiary. Where relevant beneficiaries do not submit a SBO, the shares will be held until a specified date following which they may be sold. The Bank may provide for a period in which relevant beneficiaries could come forward to claim an amount equal to the net cash proceeds of sale of a relevant number of shares.

Statements of Beneficial Ownership:

4.15 In cases where SBOs are used, they will be in electronic form, potentially delivered via existing custodian communication channels such as SWIFT, that will require the provision of relevant information from relevant beneficiaries prior to the delivery of their shares (or other compensation). A form of statement of beneficial ownership will be included in the Bail-in Resolution Instrument.

4.16 The SBO will require the relevant beneficiary to confirm their holding of the relevant bailed-in liability (where PROPPs are used) or the relevant CEs (where CEs are used) and provide relevant information, including to confirm instructions for delivery of the shares and any other securities (ie the securities account into which they should be transferred).

4.17 Additionally, where the collection of supplementary information is necessary to support the operational delivery of shares, beneficiaries would be required to provide this information in the SBO. This is likely to include disclosure permissions for data protection purposes, certifications required to confirm eligibility to receive shares as necessary, for example for US and other relevant securities law purposes,^{footnote [48]} and required information in cases where relevant beneficiaries are required to nominate alternative custodians to facilitate delivery of shares.^{footnote [49]}

4.18 A deadline will be set by which relevant beneficiaries should come forward and submit their SBO. Any relevant beneficiary that does not submit a duly completed SBO by the expiration date which will have been stipulated for completion of the process may no longer be entitled to shares or other securities to which such beneficial entitlements relate. They remain entitled to the net proceeds generated from the sale of any shares they were entitled to.

4.19 The process of submission of SBO and reconciliation of entitlements held with the CSDs/ICSDs is likely to be a significant operational undertaking, especially in cases where CEs are used and there are large numbers of CE-holders and multiple classes of CE.

4.20 The Bail-in Onward Transfer Instrument will specify the time and date at which the transfer of the shares and other securities as applicable takes effect. The Bank may effect transfers in tranches through more than one Bail-in Onward Transfer Instrument.

Direct delivery of shares

4.21 In cases where the Bank determines that information is not required from relevant beneficiaries to support the delivery of shares, the Bank may choose to arrange for the relevant shares to be credited directly to the securities accounts of relevant beneficiaries. Shares will be delivered via custodian chains based on relevant beneficiaries’ holdings in bail-in liabilities or CEs at the relevant date and will not include the submission of forms or statements from relevant beneficiaries.

4.22 The Bail-in Onward Transfer Instrument will specify the time and date at which the transfer of the shares takes effect. At this point, with the support of the Allocation Adviser and CSDs, shares will be delivered to relevant CSD/ICSD accounts.

4.23 Transfers of shares as part of resolution actions under the Banking Act do not currently incur stamp duty or stamp duty reserve tax.^{footnote [50]}

4.24 This stage of the bail-in will conclude with the making of one or more Bail-in Onward Transfer Instruments by the Bank. These instruments will give effect to the transfer of shares, any reduced bail-in liabilities in the case of a deferred bail-in and any other securities, as applicable, to the relevant beneficiaries.

4.25 Like the Bail-in Resolution Instrument, the Bail-in Supplemental Resolution Instrument and Bail-in Onward Transfer Instrument will contain instructions to be followed by parties such as CSDs, common depositaries/safekeepers and registrars to implement the measures contained in it.

Figure 6: Stylised bail-in transaction design

5: The end of bail-in and exit from resolution

5.1 The making of the Bail-in Onward Transfer Instrument(s) marks the end of the bail-in period. The BiA will cease to be entitled to exercise voting rights in respect of the shares. Such rights will be exercisable by the new equity holders and the firm will have been returned to private sector control. This is effectively exit from resolution; the appointment of the BiA may be brought to an end at this stage and the firm will be run by the new management under the supervision of the PRA. The timing of this will depend on the circumstances of the case.

5.2 Where SBOs were required, the BiA would continue to control voting rights for any unclaimed shares, until those shares are sold into the market. Unless otherwise instructed by the Bank or the BiA, within a specified number of days of the expiry of the Allocation period, the Depositary or the Bail-in Administrator will appoint a broker to sell the shares and any other securities which have not been delivered.^{footnote [52]} The proceeds of sale, net of all costs and expenses of sale, will be held by the Depositary until they can be credited to the cash account of the relevant beneficiary, for example at the CSD where the CE-holder held its CE where CEs were used or where the relevant beneficiary held its bailed-in liability, where PROPPs were used. Relevant beneficiaries who were ineligible to receive shares would be entitled to their share of the net cash proceeds of the sale of share (or other securities).

5.3 Alongside the return of the firm to private control, listings which have been suspended will be restored, in co-ordination with the FCA. Where shares and other instruments were frozen in CSDs/ICSDs during the bail-in period but not fully written down or converted, these will be unfrozen and settlement in these will be able to resume consistent with the rules of the applicable settlement system.

5.4 Even once the resolved firm has been returned to private control, some actions which were identified as required to be implemented as part of the resolution of the firm may in practice continue beyond the end of the resolution period. Most importantly, implementation of post-resolution restructuring, as set out in the business reorganisation plan, may start during the bail-in period but is likely to extend beyond the point at which the firm has exited from resolution. The length of time required to undertake the restructuring will vary depending on the specific case. The implementation of such residual or continuing measures would be supervised by the PRA.

Abbreviations and glossary

AT1 – Additional Tier 1.

BiA – Bail-in Administrator.

CCDS – Core Capital Deferred Share.

CE – Certificate of Entitlement.

CET1 – Common Equity Tier 1.

CFI – Classification of Financial Instruments (ISO 10962).

CSD – Central Securities Depository.

D-SIB – Domestic Systemically Important Bank.

FCA – Financial Conduct Authority.

FISN – Financial Instrument Short Name (ISO 18774).

FSCS – Financial Services Compensation Scheme.

FSMA 2000 – Financial Services and Markets Act 2000.

G-SIB – Global Systemically Important Bank.

ICSD – International Central Securities Depository.

ISIN – International Securities Identification Number (ISO 6166).

MGC – Management, Governance and Communication.

MREL – Minimum Requirement for own funds and Eligible Liabilities.

OCIR – Operational Continuity in Resolution.

PONV – Point of Non-Viability.

PIBS – Permanent Interest-Bearing Shares.

PPDS – Profit Participating Deferred Shares.

PRA – Prudential Regulation Authority.

PROPP – Potential Right to Onward Property or Proceeds.

RAF – Resolvability Assessment Framework.

SoP – Statement of Policy.

SRR – Special Resolution Regime.

Allocation Adviser – An agent appointed by the Bank and the firm for overall advice and support in connection with any CE programme and to assist with arranging the delivery of shares or other compensation to holders of CEs or PROPP beneficiaries, as applicable, during the Allocation Period.

Allocation Ratio – Where CEs are used, this is the ratio determined by the Bank of England following valuation for the purpose of calculating the shares or other compensation that each CE-holder of a particular class will be entitled to. Where PROPPs are used, this is the ratio determined by the Bank of England following valuation for the purpose of calculating the shares or other compensation each PROPP beneficiary of a particular class will be entitled to.

Allocation Record Date – The date as set out in the Bail-in Supplemental Resolution Instrument on which transfers of CEs will no longer be recognised and CEs will cease to be tradable. Only the holders of CEs on the register on the Allocation Record Date will be potentially eligible to receive shares (or other compensation). Where PROPPs are used, there will be no Allocation Record Date.

Bail-in – A resolution tool that enables shares, debt and other liabilities of a firm to be transferred, written down or converted to absorb losses and recapitalise the firm.

Bail-in Administrator (BiA) – A person or entity appointed by the Bank of England as a resolution administrator to perform functions as specified in the Bail-in Resolution Instrument. This could include powers of shareholders, senior management and directors.

Bail-in liabilities – Capital instruments and liabilities that both do not qualify as CET1, AT1 or Tier 2 instruments, and are not excluded liabilities as set out in section 48B(8) of the Banking Act.

Bail-in period – The period from the Resolution Time, until the return to private sector control of the firm in resolution.

Bail-in Resolution Instrument – An instrument made by the Bank under the Banking Act putting the firm into resolution and containing actions to give effect to the bail-in.

Bail-in Supplemental Resolution Instrument – An instrument made by the Bank under the Banking Act setting out Allocation Ratios and establishing the Allocation Record Date, Allocation Period and other terms relating to the allocation of shares (or other compensation) in respect of the relevant interim rights.

Banking Act 2009 (the Banking Act) – Domestic legislation that established the UK’s resolution regime and sets out the responsibilities and powers of the Bank as UK resolution authority.

Business reorganisation plan – A plan that must be developed and implemented after a bail-in to address the causes of the firm’s failure and restore long-term viability.

Central securities depository (CSD) – A specialist organisation that, as operator of a securities settlement system, holds financial instruments such as shares and bonds in a form that can easily be transferred without physical certificates.

Certificate of Entitlement (CE) – An instrument given to creditors after a bail-in which entitles them to potential compensation once the terms of allocation are announced.

CE registrar – An entity with the primary role of recording securities either physically or electronically and keeping records of the ownership of these securities.

Common depositary/safekeeper – An entity providing safekeeping and asset services for ICSDs for issues of international debt instruments.

Core Capital Deferred Share (CCDS) – A type of regulatory capital instrument issued by building societies

Crisis Management Group (CMG) – A forum bringing key supervisory and resolution authorities of a G-SIB together periodically and in a crisis, to plan for a cross-border financial crisis affecting the firm.

Critical functions – Activities (such as deposit-taking and lending) that some firms provide, which would lead to an impact on the real economy if they immediately stopped.

Custodian – An entity, usually a bank, that safekeeps and administers securities or other assets for its customers and that may provide various other services, including clearing and settlement, cash management and collateral management.

Deferred bail-in – A shorthand term for when bail-in liabilities are not written down at the start of the resolution but are transferred to a depositary to hold during the bail-in period, with the write-down being determined at a later point in the bail-in period.

Depositary – An entity (which may be a bank) appointed by the firm and the Bank to hold the shares in the firm on trust. Alternatively, the role of depositary may be fulfilled via the CREST account maintained by the Bank. In these cases, the Bank would act as custodian for the shares (and in some cases bail-in liabilities) and hold them on behalf of beneficial owners for the bail-in period.

Eligible liabilities – Non-regulatory capital instruments eligible to meet MREL requirements.

Independent valuer – A person appointed by the Bank of England to carry out valuations to support resolution as required by the Banking Act.

International central securities depository (ICSD) – A central securities depository (CSD) that settles domestic and international securities transactions and typically offers additional services such as securities lending and collateral management. ICSDs are usually run on direct or indirect (through correspondent banks) links to local CSDs.

Issuing and paying agent (IPA) – An agent appointed by an issuer to assist with issuing securities and processing payments such as coupons and redemptions, eg fiscal and principal paying agents.

Mandatory reduction – A statutory process under the Banking Act whereby the Bank must cancel, dilute or transfer a firm’s CET1 instruments away from the original owners and write down or convert AT1 and Tier 2 regulatory capital instruments issued by the firm into CET1, if certain conditions are met.

Master CE – The certificate of entitlement in registered form representing all CEs of a particular class to be issued by the firm, the form of which will be contained in the Bail-in Resolution Instrument.

Minimum requirement for own funds and eligible liabilities – A requirement for a firm to maintain a minimum amount of equity and liabilities which meet certain criteria so that, if a firm fails, losses can be absorbed and the resolution authority can implement the resolution strategy.

National Numbering Agency (NNA) – An organisation responsible for issuing International Securities Identification Numbers (ISIN) as well as CFIs and FISNs. The National Numbering Agency for Great Britain, Jersey, Guernsey and Isle of Man is the London Stock Exchange Plc – UK NNA.

Onward Transfer Instrument – An instrument made by the Bank under the Banking Act to give effect to the transfer of shares (or other compensation) to relevant beneficiaries.

Potential Right to Onward Property or Proceeds (PROPPs) - Contingent beneficial interests that represent the beneficiary’s potential right to compensation in the form of either equity shares in the failed firm or an amount equal to the net cash proceeds of those shares. PROPPs are not transferable or capable of being traded.

Registrar – An entity that records the ownership of equities and/or other securities.

Resolution powers/tools – The Banking Act gives the Bank a number of statutory powers to resolve a firm. These include the bail-in and transfer tools.

Resolution Time – The precise time and date at which the firm is placed into resolution, as defined in the Bail-in Resolution Instrument.

Resolution weekend – The period immediately prior to and in which a firm is put into resolution by the Bank using its statutory powers.

Annex 1: Template Resolution Instruments

These draft Template Resolution Instruments have been included to give an indication of how a bail-in might be operationalised. They are being published to provide further understanding of the kinds of actions the Bank might take, and how it might take them, in a resolution. However, the Template Resolution Instruments are for illustrative purposes only. In light of the fact that bail-in is a crisis management tool, the Bank must be able to retain the full discretion accorded to it under the Banking Act as to how to respond to the circumstances of a particular case. Any use of the Bank’s bail-in powers will depend on the facts and circumstances of the particular case, and may be different from the actions and approach set out in these Template Resolution Instruments. Accordingly, the Template Resolution Instruments are not, and should not be regarded as, indicative of the Bank’s settled view in relation to any aspect of bail-in or resolution generally or as indicative that any actual Bail-in Resolution Instruments which may be required in connection with the resolution of a particular firm would be in this form or would contain provisions the same as or similar to any of the provisions therein.

The Template Resolution Instruments have been drafted on a hypothetical basis in relation to a firm where the bail-in would be a single point of entry bail-in. For the purpose of illustrating how the mechanics of a bail-in might work, a simplified hypothetical capital structure has also been assumed, with the bail-in affecting MREL instruments, including Common Equity Tier 1 (CET1), Additional Tier 1 (AT1), Tier 2 (T2) and eligible liabilities. It is possible that in an actual resolution, other categories of debt instrument issued by a firm could also be bailed-in.

• Template Bail‑in Resolution Instrument (Certificates of Entitlement)
• Template Bail‑in Resolution Instrument (PROPPs)
• Template Bail‑in Resolution Instrument (Building Society)
• Template Bail-in Supplemental Resolution Instrument (Certificates of Entitlement)
• Template Bail-in Supplemental Resolution Instrument (PROPPs)
• Template Bail-in Onward Transfer Instrument (Certificates of Entitlement)
• Template Bail-in Onward Transfer Instrument (PROPPs)