The Bank Recovery and Resolution (Amendment) Regulations 2025 amend the 2014 Order to allow the Bank of England to set transitional periods and minimum requirements for own funds and eligible liabilities (MREL) for financial institutions.
This provides flexibility for banks to meet MREL requirements over time while maintaining effective supervision, drawing upon the Bank of England's Statement of Policy, and considering the potential availability of recapitalisation payments.
The regulations also clarify the inclusion of transitional MREL in the definition of minimum own funds and eligible liabilities, and remove a power for the Bank relating to technical standards.
Arguments For
Improved flexibility for banks: The introduction of transitional MREL requirements allows banks more time to meet the full MREL requirements, reducing the financial burden and potentially avoiding disruptive measures.
Enhanced supervisory powers: The amendments to the 2014 Order grant the Bank of England more flexibility in setting MREL, enabling them to tailor requirements based on individual circumstances, promoting financial stability.
Increased transparency: The regulations incorporate the Bank of England's Statement of Policy, bringing more transparency to the MREL setting process.
Alignment with evolving regulatory landscape: The changes reflect adaptations to post-Brexit regulations, adjusting to a new policy landscape and potentially enhancing the UK's financial resilience.
Arguments Against
Potential for regulatory arbitrage: The introduction of a transitional period may create complexities and opportunities for banks to strategically utilize it, potentially undermining the ultimate aim of improved financial stability.
Increased administrative burden: Determining transitional periods and requirements may place an increased administrative burden on both the Bank of England and the regulated financial institutions.
Lack of clarity (potentially): The interaction between the new provisions and existing legislation might not be perfectly clear, potentially creating legal uncertainties for affected parties.
Unintended consequences: The specific measures of implementing the transitional periods need rigorous evaluation to mitigate against unpredictable market reactions.
The Treasury make these Regulations in exercise of the powers conferred by sections 3(1) and 84(2) of the Financial Services and Markets Act 2023 (“the Act”)1.The Treasury have consulted the Financial Conduct Authority, the Prudential Regulation Authority and the Bank of England in accordance with section 3(6) of the Act.
The Treasury created these regulations under the authority of the Financial Services and Markets Act 2023.
They consulted with relevant financial authorities before doing so.
These Regulations may be cited as the Bank Recovery and Resolution (Amendment) Regulations 2025.
The official name for these regulations is the Bank Recovery and Resolution (Amendment) Regulations 2025.
These Regulations come into force on 1st January 2026.
These regulations take effect on January 1, 2026.
These Regulations extend to England and Wales, Scotland and Northern Ireland.
These regulations apply across the whole of the United Kingdom.
The Bank Recovery and Resolution (No. 2) Order 20142 is amended as follows.
Changes are made to the Bank Recovery and Resolution (No. 2) Order 2014.
In article 121 (interpretation of Chapter 1), after paragraph (2), insert—
(3) In this Chapter, references to the “minimum requirement for own funds and eligible liabilities” include any transitional minimum requirement which the Bank determines that an institution is required to hold in accordance with article 123(1C)3.”
Article 121 of the 2014 Order is amended.
The definition of "minimum requirement for own funds and eligible liabilities" is updated to include any transitional minimum requirement the Bank of England sets according to article 123(1C).
In article 123 (determination of minimum requirement)—
(a) after paragraph (1), insert—
(1A) The Bank may determine a transitional period for a relevant institution, during which time a transitional minimum requirement applies. (1B) The Bank may amend or revoke a determination under paragraph (1A), or determine a further transitional period in relation to a relevant institution, at any time including where a previous transitional period has expired. (1C) Where the Bank determines a transitional period under paragraph (1A) or paragraph (1B), it must determine the transitional minimum requirement that applies during that period. (1D) The Bank may amend or revoke any determination under paragraph (1C) at any time.
(b) in paragraph (6)—
(i) in sub-paragraph (b)4, after “appropriate cases” insert “, taking into account whether recapitalisation payments under section 214E of FSMA (recapitalisation payments)5 may be available”
;
(ii) in sub-paragraph (f)6, for “any Commission Regulation containing regulatory technical standards adopted by the European Commission under Article 45.2 of the recovery and resolution directive, so far as they are assimilated law” substitute “the Bank of England’s Statement of Policy on its approach to setting a minimum requirement for own funds and eligible liabilities issued pursuant to section 3B(9) of the Banking Act 20097, as that Statement of Policy may be amended from time to time”
.
(c) omit paragraph (8).
Article 123 is amended to allow the Bank of England to set transitional periods and minimum requirements.
The Bank must consider recapitalisation payments and its own Statement of Policy when setting MREL. Paragraph (8) is removed.
In article 125 (application and interpretation of Chapter 2), in paragraph (2)—
(a) in the definition of “minimum consolidated requirement”, after “institutions” insert “, including any transitional minimum consolidated requirement of the group institutions in accordance with article 126(2C)8”
;
(b) in the definition of “minimum requirement”, after “liabilities” insert “, including any transitional minimum requirement in accordance with article 135(2C)9”
.
Amendments are made to Article 125, updating the definitions of "minimum consolidated requirement" and "minimum requirement" to include any transitional minimum requirements as per articles 126(2C) and 135(2C) respectively.
In article 126 (determination of minimum consolidated requirement)—
(a) after paragraph (2) insert—
(2A) The Bank may determine a transitional period for a resolution group, during which time a transitional minimum consolidated requirement applies. (2B) The Bank may amend or revoke a determination under paragraph (2A), or determine a further transitional period in relation to a resolution group, at any time including where a previous transitional period has expired. (2C) Where the Bank determines a transitional period under paragraph (2A) or paragraph (2B), it must determine the transitional minimum consolidated requirement that applies during that period. (2D) The Bank may amend or revoke any determination under paragraph (2C) at any time.
(b) in paragraph (8)(a)—
(i) in paragraph (ii), after “appropriate cases” insert “, taking into account whether recapitalisation payments under section 214E of FSMA may be available”
; and
(ii) in paragraph (vi), for “any Commission Regulation containing regulatory technical standards adopted by the European Commission under Article 45.2 of the recovery and resolution directive, so far as they are assimilated law” substitute “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, as that Statement of Policy may be amended from time to time”
.
Similar to the changes made to Article 123, Article 126 is also amended to allow the Bank of England to set transitional periods and requirements for resolution groups.
The basis for MREL determination is also adjusted to consider recapitalisation payments and the Bank of England's Statement of Policy.
In article 135 (determination of minimum requirement for group institutions), after paragraph (2) insert—
(2A) The Bank may determine a transitional period for an institution, during which time a transitional minimum requirement applies. (2B) The Bank may amend or revoke a determination under paragraph (2A), or determine a further transitional period in relation to an institution, at any time including where a previous transitional period has expired. (2C) Where the Bank determines a transitional period under paragraph (2A) or paragraph (2B), it must determine the transitional minimum requirement that applies during that period. (2D) The Bank may amend or revoke any determination under paragraph (2C) at any time.
Article 135 is similarly amended, allowing the Bank of England to set transitional periods and minimum requirements for group institutions.
This mirrors the changes applied to Articles 123 and 126.
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.
The explanatory note summarizes that the regulations amend the 2014 Order regarding the Bank of England's power to set minimum requirement for own funds and eligible liabilities (MREL) for financial institutions.
MREL ensures institutions have sufficient capital to facilitate resolution action if necessary.
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.
The explanatory note details the amendment to Article 123 of the 2014 Order, which allows the Bank of England to set transitional MREL requirements.
This gives institutions more time to achieve full compliance.
The definition of "minimum own funds and eligible liabilities" also reflects this change.
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.
The amendment to Article 123(6) ensures the Bank of England considers potential recapitalization payments and its own Statement of Policy, providing increased transparency and clarity in setting MREL requirements.
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.
The Bank of England's power to create technical standards for assessing MREL requirements is removed.
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.
Similar amendments are made to Chapter 2 of Part 9 of the 2014 Order, addressing MREL requirements for groups where the Prudential Regulation Authority or Financial Conduct Authority 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.
Equivalent amendments are also made to Chapter 4 of Part 9, addressing MREL requirements for group institutions under the supervision of the PRA or FCA.
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.
No impact assessment was conducted because no significant impact on businesses, charities, or the public sector was predicted.