The Bank Recovery and
Resolution (Amendment) Regulations 2025
EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations amend the Bank Recovery and Resolution (No. 2)
Order 2014 (S.I. 2014/3348) (“the
2014 Order”). They make certain changes to the provisions in the
2014 Order which relate to the requirement for the Bank of
England (“the Bank”) to set a minimum requirement for own funds
and eligible liabilities (“MREL”) for relevant financial
institutions. MREL is a requirement set by the Bank for relevant
institutions to maintain sufficient equity and subordinated debt
to support the effective use of the Bank's write-down and
conversion powers under the Banking Act 2009 (c. 1) in the
event that such an institution fails and it is necessary for the
Bank to take resolution action.
Regulation 2(3)(a) makes provision relating to the Bank's ability
to set a transitional period and transitional MREL requirement
for relevant institutions by amending Article 123 of the 2014
Order (determination of minimum requirement). Article 123 of the
2014 Order sets out the basis upon which the Bank can make a
determination of full (“end-state”) MREL requirements in respect
of a financial institution. In particular, the assessment
criteria which apply to end-state MREL requirements are set out
in Article 123(6) of the 2014 Order. Regulation 2(3)(b) inserts
new paragraphs (1A) to (1D) into Article 123 which make provision
for the Bank to set a transitional MREL requirement. This is a
requirement for the relevant institution to hold a specified
amount of MREL for a specified transitional period, reflecting
the approach taken by the Bank where a particular institution is
building up its MREL resources to the level needed to meet its
end-state MREL requirements. Regulation 2(2) makes a related
amendment to the definition of “minimum own funds and eligible
liabilities” in Article 121 (interpretation) to include
transitional MREL within that definition.
Regulation 2(3)(b) makes amendments to Article 123(6) of the 2014
Order to ensure that the Bank can take account of the potential
availability of recapitalisation payments under section 214E
(recapitalisation payments) of the Financial Services and Markets
Act 2000 (c. 8) when
making an MREL determination, and to require the Bank to base any
MREL determination on (in addition to other factors already set
out in Article 123(6)) the Bank of England's Statement of Policy
on its approach to setting a minimum requirement for own funds
and eligible liabilities issued under section 3B(9) of the
Banking Act 2009. That Statement of Policy can be obtained at
https://www.bankofengland.co.uk/paper/2021/the-boes-approach-to-setting-mrel-sop
or in hard copy from the Bank of England, Threadneedle Street,
London, EC2R 8AH.
Regulation 2(3)(c) omits the Bank's power to make technical
standards relating to the assessment criteria upon which it must
base a determination of MREL requirements.
Regulation 2(4) and (5) makes equivalent amendments to Chapter 2
of Part 9 of the 2014 Order, which sets out the Bank's duties in
relation to the determination of MREL requirements for relevant
groups where the PRA or FCA is the consolidating supervisor.
Regulation 2(6) makes equivalent amendments to Chapter 4 of Part
9 of the 2014 Order, which relates to the determination of MREL
requirements for group institutions where the PRA or FCA is the
consolidating supervisor.
No impact assessment has been prepared for these Regulations as
there is no, or no significant, impact predicted on businesses,
charities, voluntary bodies or the public sector.
