Prudential Regulation Authority finalises depositor protection rules enabling FSCS recapitalisation payments and levies under the new bank resolution tool

The Prudential Regulation Authority has published a policy statement finalising amendments to the Depositor Protection Part of its Rulebook to implement the Bank Resolution (Recapitalisation) Act 2025. The changes are designed to ensure the Financial Services Compensation Scheme can make recapitalisation payments when required by the Bank of England as resolution authority and levy the industry to recoup those payments, supporting continuity of banking services in a failure. The package defines “recapitalisation payments” and associated levies, creates a new levy payer class covering Deposit Guarantee Scheme members that are not credit unions, and updates the treatment of recoveries so they are held to the credit of the relevant levy payer class. It also aligns existing constructs such as the management expenses levy and the annual levy limits to include recapitalisation-related costs, applies the existing levy contribution approach used for compensation levies to recapitalisation levies (with credit unions excluded), and removes spent provisions including references to legacy 2008 crisis-related costs and rules on cross member state acquisitions. Following seven consultation responses, the PRA made no material changes, with one minor amendment to rename the new recapitalisation levy class to “class A2” to align with Financial Conduct Authority levy class naming. The rule changes were made on 15 July 2025 and came into force on 16 July 2025 in line with commencement of the Act. Updates to Supervisory Statement 18/15 and the Deposit Guarantee Scheme statement of policy linked to the Act are expected alongside a separate policy statement covering proposed changes to depositor protection limits consulted on in CP4/25.