The Bank of England published an overview of how the UK’s resolution regime is intended to manage the failure of a bank, building society or central counterparty without jeopardising financial stability or relying on public funds, and it highlighted how the updated minimum requirement for own funds and eligible liabilities (MREL) policy effective from 1 January 2026 links to firms’ preferred resolution strategies. The note sets out three broad resolution strategies used in planning: bail-in (debt-to-equity restructuring supported by loss-absorbing capacity), transfer to a private sector purchaser or to a temporary Bank of England-owned bridge bank pending sale, and the bank/building society insolvency procedure (BIP) that prioritises payout or account transfer for protected depositors via the Financial Services Compensation Scheme (FSCS), with deposit protection described as up to GBP 120,000 per eligible depositor. Strategy selection is framed as subject to a public interest test guided by seven special resolution objectives, supported by safeguards including the No Creditor Worse Off principle, with compensation paid by His Majesty’s Treasury and later recovered from industry. Under the updated approach, firms with more than GBP 40 billion in total assets should expect to be set a bail-in strategy, while institutions between GBP 25 billion and GBP 40 billion will be assessed case by case for bail-in versus transfer; insolvency may be preferred where a smaller firm is unlikely to disrupt the wider system or provide significant transactional banking services, with such firms described as likely not exceeding GBP 25 billion in total assets. The article also explains that MREL resources must meet criteria including a minimum maturity of one year, that the indicative threshold for MREL has been raised to the GBP 25 billion to GBP 40 billion asset range with thresholds to be updated over time in line with nominal growth, and that MREL requirements for firms subject to transfer strategies have been removed, alongside reference to the industry-funded safety net established under the Bank Resolution (Recapitalisation) Act 2025. The Bank indicated it will continue to iterate the regime in response to changes in risks and market structure, and noted that recent legislation has enhanced its powers for central counterparty resolution, including tools such as cash calls and contract tear-up.
Bank of England 2026-01-09
Bank of England outlines UK resolution strategies and new MREL thresholds with bail-in expected above GBP 40 billion assets
The Bank of England outlined the UK's resolution regime for managing bank failures without risking financial stability or public funds, highlighting the updated minimum requirement for own funds and eligible liabilities (MREL) policy effective from 1 January 2026. The regime includes strategies like bail-in, transfer to a private sector purchaser or bridge bank, and insolvency, with strategy selection based on asset size and public interest, supported by safeguards and compensation.