The Bank of England (BoE) has published a consultation paper proposing the partial revocation of the UK Technical Standard (UKTS) 2018/1624 on resolution reporting, specifically relating to COREP13 templates. The proposal seeks to remove six templates that collect on- and off-balance sheet data from firms for resolution planning, to reduce duplicative and non-essential reporting for firms regulated by the UK Prudential Regulation Authority (PRA). The BoE intends to rely on alternative means to have access to information it requires to meet its obligations, such as the Resolvability Assessment Framework and revised PRA Minimum Requirement for Own Funds and Eligible Liabilities (MREL) reporting templates expected to take effect from 1 January 2027. The BoE plans to publish the revised policy by the end of Q1 2026, with the proposed revocation date taking effect from 1 April 2026, ahead of the next annual reporting cycle. Firms would no longer be required to submit the six deleted templates, although they may remain visible in the RegData reporting system due to technical limitations. In such cases, firms are expected to use simple negative filing indicators. The remaining COREP13 templates will be kept under review as part of ongoing efforts to simplify resolution-related reporting. The deadline for comments is 21 November, with the proposed changes set out in the draft Bank Resolution Standards Instrument: The Technical Standards (COREP13) Instrument 2025.

The European Banking Authority (EBA) has published its final report amending the implementing technical standards (ITS) under Commission Implementing Regulation (EU) 2021/622, which governs the reporting of Minimum Requirement for Own Funds and Eligible Liabilities (MREL) decisions by resolution authorities. The amendments aim to strengthen the EBA's ability to monitor the consistent implementation of MREL across the EU, as required under Directive 2014/59/EU (the Bank and Recovery Resolution Directive). The revised ITS increase the reporting frequency from annual to biannual, with submissions due from resolution authorities by 16 September and 18 March, covering MREL applicable as of 30 June and 31 December, respectively. This change addresses the current lag in the EBA's publications and assessments, which previously excluded decisions adopted after 1 May until the following year. The revised ITS also introduce changes to better capture discretionary elements applied by resolution authorities, align reporting with recent legislative updates, including the "Daisy Chain Act" (Directive (EU) 2024/1174), and streamline templates to reduce administrative burden. The proposed amendments to the Annexes of Regulation (EU) 2021/622 are available on the EBA's webpage. As the changes are addressed exclusively to resolution authorities and do not alter institutions' reporting obligations, the EBA did not conduct a public consultation. The final draft ITS will be submitted to the European Commission for endorsement, and once adopted, will be published in the Official Journal of the European Union. The amended ITS are expected to apply from 31 December.

HM Treasury (HMT) has published a revised Memorandum of Understanding (MoU) with the Bank of England (BoE) and UK Prudential Regulation Authority (PRA) on financial crisis management, replacing the previous version from October 2017. The MoU sets out the coordinated responsibilities of HMT, the BoE and the PRA, under the Banking Act 2009, the Financial Services Act 2012 and the Financial Services and Markets Act 2023 (FSMA 2023). The MoU has been updated to align with key developments since 2017.

The EU Single Resolution Board (SRB) has launched a consultation on its operational guidance for banks on separability and transferability. The SRB has updated its 2021 operational guidance on separability and seeks to align it with the SRB's operational guidance on resolvability self-assessment, with the SRB's focus now being on operationalisation, resolution testing, and crisis readiness. It is accompanied by an operational framework for transfer playbooks and an annex on testing. It is intended to clarify the procedures for banks and resolution authorities to operationalise the use of transfer tools, supporting enforcement of Articles 38-42 of Directive 2014/59 (BRRD) and applies to all banks under the SRB's remit with transfer tools in their resolution plans. The SRB states that this update 'does not introduce new deliverables, but instead it seeks to enhance the effectiveness of existing ones. The SRB invites feedback on the updates and their impact on banks' current deliverables by 22 October. The guidance is intended to be applicable from the resolution planning cycle 2026.

The Single Resolution Board (SRB) published its Operational Guidance for Banks on Resolvability Self-Assessment, accompanied by a press release. This marks a shift towards a more structured and standardised approach for banks to resolvability self-assessments and rigorous testing. The guidance, part of the SRM Vision 2028 strategy, introduces a set of criteria to assess the extent to which banks meet the resolvability capabilities outlined in the Expectations for Banks (EfB). It includes a self-assessment template structured around the seven resolvability dimensions set out in the EfB, covering all elements of crisis readiness. It outlines the capabilities that banks should have in place to effectively execute resolution measures during a crisis. The methodology will also reflect how well banks' resolvability capabilities work in practice through their regular testing. The guidance was consulted on in December 2024, with key feedback summarised in a feedback statement. In response to consultation feedback, the framework has been simplified to reduce administrative burden. Key changes include cutting resolvability capabilities by 20%, changing the reporting frequency to every two years and the introduction of a less granular reporting structure, notably for testing activities. Banks are required to submit their first self-assessment report under the new format by 31 January 2026, reflecting their resolvability self-assessment as of 31 December. In light of the ongoing development of new policies and guidance, the self-assessment report may be subject to targeted amendments in the future. The SRB confirms that operational guidance on the testing framework, which complements the self-assessment approach, will be published later this year.

The European Banking Authority has launched a consultation on proposed revisions to its regulatory technical standards (RTS) on resolution plans and resolution colleges, under Delegated Regulation (EU) 2016/1075, adopted in accordance with the EU Bank Recovery and Resolution Directive. For resolution plans, the proposed changes seek to tackle the issue of increasingly long and detailed plans which have limited optionality by: (i) simplifying and streamlining resolution plans; (ii) making plans more operational to improve their usability, including by separating choice and execution of resolution strategy from assessment of an institution's resolvability; and (iii) introducing greater optionality to improve the flexibility of resolution planning. On resolution colleges, the proposed changes aim to simplify processes, improve cooperation and information exchange among authorities and improve coordination in the implementation of a resolution scheme. The deadline for responses on the consultation is 5 November, with a public hearing scheduled for 16 September. Registration for the public hearing is due by 10 September.

HM Treasury has published an updated version of the Banking Act 2009 Special Resolution Regime Code of Practice. The code sets out resolution tools and powers available under the Banking Act 2009 for authorities to use in certain circumstances. This latest version has been updated to reflect three developments: (i) the removal of FCA solo-regulated firms from the UK resolution regime; (ii) the introduction of the UK's expanded resolution regime for central counterparties (CCPs), meaning the Code no longer applied to CCPs; and (iii) the Bank Resolution (Recapitalisation) Act 2025, where the code has a new chapter on the recapitalisation payment mechanism.

The Bank Resolution (Recapitalisation) Act 2025 (Commencement) Regulations 2025 have been made, which brings into force certain provisions of the Bank Resolution (Recapitalisation) Act 2025 from 16 July, in parallel with the Prudential Regulation Authority (PRA) confirming concomitant changes to its rules also taking effect on 16 July, in its policy statement. The Act makes provision for recapitalisation costs in relation to the special resolution regime under the Banking Act 2009, and in particular, on how the regime is applied to smaller banks which do not hold a minimum requirement for own funds and eligible liabilities (MREL). It expands the statutory functions of the Financial Services Compensation Scheme (FSCS) so that it is required to provide funds to the Bank of England on request, which can be used to meet certain costs from the use of the resolution regime to manage the failure of a bank, building society or other PRA-authorised investment firm.

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The Bank of England (BoE) has published a suite of publications in its capacity as the UK's resolution authority, covering significant updates in relation to its approach to setting the minimum requirement for own funds and eligible liabilities (MREL) and preferred resolution strategies, and its approach to assessing resolvability under the resolvability assessment framework (RAF).

On MREL and resolution strategies, the BoE has made a substantive update to the MREL framework, publishing a policy statement confirming the changes and an updated Statement of Policy which will be effective from 1 January 2026. As a high-level summary, key areas of change are set out below.

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The European Banking Authority (EBA) has published a consultation paper proposing amendments to Commission Delegated Regulation (EU) No 241/2014 on the timing for the application for prior permission to reduce own funds and eligible liabilities instruments under Articles 77, 78 and 78a of the Capital Requirements Regulation (CRR). The assessment timeline to process the applications to reduce own funds and eligible liabilities instruments had been extended the from three to four months, to accommodate more complex evaluations by competent and resolution authorities. However, following a monitoring period and in light of feedback from institutions, the EBA now considers that authorities have gained sufficient experience to process applications more efficiently. As such, the EBA proposes reverting to a three-month timeframe. References to the simplified requirement for liquidation entities, with an MREL set at the loss absorption amount, are also deleted from the RTS. This is to reflect amendments made by Directive 2024/1174 to the Bank Recovery and Resolution Directive, which exclude liquidation entities from the requirement to obtain the prior permission of the resolution authority to affect the call, redemption, repayment or repurchase of liabilities that would meet the eligibility requirements for the MREL. The deadline for comments on the consultation is 9 October following which the EBA will submit the final draft RTS to the European Commission for adoption.

The Single Resolution Board (SRB) has published updated operational guidance, accompanied by a press release, on the solvent wind-down (SWD) of trading books. The guidance is intended to outline the scope and key expectations for SWD planning and potential execution. Its objectives are to provide a framework to: (i) ensure that banks are adequately prepared and possess the necessary capabilities to plan for a SWD in resolution; and (ii) enable the timely and effective execution of the SWD plan within a reasonable timeframe. This version of the guidance updates and replaces the SRB's original SWD guidance, published in December 2021, which was aimed at facilitating the phase-in of SWD-related expectations. It incorporates feedback from banks and other stakeholders, and addresses the shortcomings identified by the SRB from its review of banks' deliverables. The SRB has also simplified the guidance by removing complexity and enhancing proportionality.

The Council of the EU and the European Parliament have announced they have reached a political agreement on the legislative package to reform the crisis management and deposit insurance framework for banks in the EU. The package includes targeted amendments to the Bank Recovery and Resolution Directive, the Single Resolution Mechanism Regulation and the Deposit Guarantee Schemes Directive. The reform aims to strengthen the EU's ability to manage bank failures, including small and medium-sized banks, by facilitating access to industry-funded safety nets, such as national resolution funds and the Single Resolution Fund. These tools are intended to supplement a failing bank's own loss-absorbing capacity, thereby reducing reliance on taxpayer-funded bailouts, referred to as the "bridge the gap" mechanism.

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The UK Bank Resolution (Recapitalisation) Act 2025 has received royal assent and was published. The Act makes provision for recapitalisation costs in relation to the special resolution regime under the Banking Act 2009, in particular in so far as the regime is applied to smaller banks which do not hold MREL (a minimum requirement for own funds and eligible liabilities). It: (i) expands the statutory functions of the Financial Services Compensation Scheme (FSCS), requiring it to provide funds to the Bank of England upon request which could be used to meet certain costs arising from the use of the resolution regime to manage the failure of a bank, building society or Prudential Regulation Authority (PRA) authorised investment firm; (ii) allows for the FSCS to use its levy-raising powers to recover any funds provided to the Bank of England after a failure event through imposing levies on the banking sector; (iii) extends the Bank of England's ability, through explicit provision, to require the issuance of shares in connection with a resolution, to facilitate the Bank's use of the funds provided by the FSCS to meet a failing bank's recapitalisation costs; and (iv) makes a number of minor and consequential amendments to legislation to support the measures outlined above and ensure FSCS funds can be used effectively in a resolution. The provisions of the Act are expressed to come into force on such day as HM Treasury may appoint by statutory instrument.

The European Banking Authority (EBA) has published its final report on the draft implementing technical standards (ITS) on resolution planning reporting, together with a press release. Firms must provide necessary information to resolution authorities, as mandated by the Bank Recovery and Resolution Directive, to develop resolution plans. The ITS outlines procedures, standard forms and templates for the provision of information required by resolution authorities to draw up these plans. This comprehensive review of the ITS aims to achieve full harmonisation and simplification of EU reporting requirements, reducing compliance costs by avoiding duplication of data requests and eliminating data points that are either redundant or of limited value.

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The Bank of England (BoE) has published the Bank Resolution Standards Instrument: The Technical Standards (Simplified Obligations) Instrument 2025 revoking UK Commission Delegated Regulation (EU) 2019/348, containing technical standards on simplified obligations (SO-UKTS). Following the UK's withdrawal from the EU, the UK retained the EU Framework for determining the level of information required within recovery and resolution plans. This included the process in the SO-UKTS to determine whether 'Simplified Obligations' (SO) can be imposed in respect of such plans. The BoE has found that the assessment prescribed in the SO-UKTS identifies the same firms as the process that results in the setting of a preferred resolution strategy of modified insolvency. Accordingly, the BoE has determined that it can achieve the same outcomes using this more efficient, existing process instead of the duplicative SO-UKTS process. The ability to apply SO and any consequential benefits to firms from SO will not be affected; the Bank only proposes to simplify the process whereby a firm is designated as eligible for SO. The updated webpage confirms that the BoE did not receive any formal responses or queries on its December 2024 consultation and consequently is proceeding with the revocation as consulted on. The instrument came into force on 30 April.

The Financial Services Regulatory Initiatives Forum (the Forum) has published the Regulatory Initiatives Forum Grid (the Grid), with the UK Financial Conduct Authority (FCA) also updating its webpage. The previous Grid was due to be published in May 2024 but was postponed due to the General Election, meaning the Forum published only an interim update in October 2024.

The 2025 Grid sets out the regulatory pipeline for the next 24 months and reflects the reprioritisation that has taken place since the new government came into power. Notable initiatives include:

• motor finance commission review: the FCA intends to confirm, within six weeks of the Supreme Court's decision on past use of discretionary commission arrangements by motor finance firms, whether it will propose a redress scheme;
• liquidity risk management in funds: the FCA will consult on refined proposals regarding liquidity risk management in funds to implement FSB and IOSCO guidelines;
• Consumer Composite Investments (CCI) Regulation: the FCA published a second consultation paper on the new CCI regime on 16 April (see our update) and plans to issue a Policy Statement with final rules in late 2025;

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The European Banking Authority (EBA) has published a report on the findings of a peer review of the performance of stress tests by deposit guarantee schemes (DGS). The aim of the peer review was to assess the performance of stress tests by seven national DGS against five benchmarks stemming from the Deposit Guarantee Schemes Directive and the revised guidelines on stress tests of DGS. The EBA found that (i) all DGS effectively developed their stress testing programs in accordance with the methodology outlined in the guidelines, with only minor shortcomings, (ii) all DGS demonstrated effective cooperation with relevant authorities, with robust stress testing of these arrangements, (iii) five DGS could fully or largely showcase increased severity and complexity of their testing scenarios to adequately stress test their ability to intervene, with one partially demonstrating this and one, not at all, and (iv) five DGS could fully or largely showcase that they identified areas for improvement in their systems and have taken, or have planned to, take measures to address these areas, with only two partially demonstrating this. The report also details several follow-up measures for all EU DGS focusing on the prompt development of stress tests; the performance of stress tests; cooperation; severity and complexity of stress tests; and the identification of areas of improvement. The EBA will conduct a follow-up peer review of the implementation of the measures included in the report in two years.

The Single Resolution Board (SRB) has published a press release confirming it had launched a public consultation on its expectations on valuation capabilities (dated 1 April). The consultation forms part of the Single Resolution Mechanism's Vision 2028 strategy. The expectations, which banks are expected to consider when implementing Principle 5.2 of the SRB's Expectations for Banks which requires banks to have management information systems in place for valuations. The expectations document, which is published alongside the relevant annexes, covers three key areas: (i) valuation data index, which includes an enhanced version of the SRB valuation data set and comprises information and documentation that is already available at bank level and publicly available or accessible to the SRB; (ii) data repositories for resolution, which is expected to be populated with valuation data index (see (i) above) information; and (iii) valuation playbooks. The deadline for comments is 2 July.

The UK Bank of England (BoE) has published its consultation paper CP4/25 which contains proposals for depositor protection and the new resolution tool proposed by the Bank Resolution (Recapitalisation) Bill. The consultation paper was published alongside relevant appendices and a press release.

The first part of the consultation proposes increasing the FSCS deposit protection limit from £85,000 to £110,000, and increasing the limit applicable to temporary high balance claims from GBP1 million to GBP1.4 million. The increases take into account the effect of consumer price inflation since the limit was last updated in 2017, with the UK Prudential Regulation Authority (PRA) revising the figure to a round number for memorability, with the aim of increasing depositor awareness and confidence in the deposit protection framework. The consultation also proposes changes to the PRA's supervisory expectation, reinstating that firms should ensure their systems are able to accommodate limit changes at short notice.

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The Single Resolution Board (SRB) has opened a consultation on its operational guidance on resolvability testing for banks under the SRB's remit. It aims to ensure that European banks are regularly testing their capabilities to handle a crisis and to implement a resolution action, and promote a harmonised approach for the implementation of the multi-annual testing programme. With reference to the European Banking Authority's guidelines on improving resolvability, it defines testing areas and sub-areas, testing methods, as well as expectations for testing governance, design, preparation and reporting. The multi-annual testing programme will define the testing exercises banks will conduct over a three-year period, with an annual review to incorporate developments from the previous year. A natural feedback loop exists between resolvability assessment and testing: resolvability assessment outcomes will shape testing priorities, while testing results will validate operational effectiveness and inform future resolvability assessments. The consultation incorporates lessons learned from past crises and best practice. The deadline for submitting feedback is 5 May. The SRB expects to publish final guidance in Q3.

The Silicon Valley Bank UK Limited Compensation Scheme Order 2025 (SI 2025/83) has been published, together with an explanatory memorandum. The order confirms in law that no compensation is due to the persons who held shares in Silicon Valley Bank UK Ltd before those shares were transferred to HSBC UK Bank plc in March 2023, as part of the resolution of SVB UK. HMT is required to make a Compensation Scheme Order where the private sector purchaser option has been exercised, in order to facilitate any compensation due to shareholders. HMT has made this determination following consultation with the BoE, which carried out a provisional valuation of SVB UK prior to its resolution and subsequently commissioned an independent valuation of SVB UK which confirmed the provisional valuation. The valuations concluded that no compensation is due to shareholders of SVB UK. The order came into force on January 28, 2025.

The Financial Stability Board has published its work program for 2025. Priority areas of work for 2025 include:

• supporting global cooperation on financial stability: the FSB will continue monitoring global financial stability developments and the implications of emerging financial innovation, and conduct in-depth analysis on vulnerabilities in non-bank financial intermediation and climate change;
• enhancing the resilience of NBFI: while preserving its benefits, the FSB workstream includes finalizing policy recommendations on NBFI leverage, developing and beginning implementation of a medium-term workplan to address issues relating to non-bank data availability, use and quality and analyzing the resilience and functioning of the repo market;
• harnessing the benefits of digital innovation while containing its risks: the FSB will produce a thematic peer review on implementation of its crypto-asset recommendations, a report on how financial authorities can monitor AI adoption and assess related vulnerabilities, and finalize the format for incident reporting exchange;

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The Single Resolution Board has published a revised version of the operational guidance on operational continuity in resolution. The guidance provides further clarifications to banks on how to implement SRB expectations for resolvability related to: (i) service identification and mapping; (ii) assessment of operational continuity risk; and (iii) mitigating measures, such as having adequately documented, resolution-resilient contracts, appropriate management information systems, and governance arrangements.

The guidance was originally published in 2021, the new revisions follow the development of new frameworks, such as the Digital Operational Resilience Act, and new provisions, such as the European Banking Authority's Guidelines on improving resolvability. The SRB notes that some of the additions will, in practice, depend for their application on measures currently pending.

The Bank of England has published a statement of policy setting out its approach to exercising its power to direct a CCP to address impediments to resolvability under the Financial Services and Markets Act 2023. This power applies to U.K.-based CCPs. The BoE also has a new power to direct a parent company of a CCP to establish a separate holding company for specific purposes, if the CCP is a subsidiary of a company incorporated in the U.K.

The policy statement summarizes the feedback received to the BoE's July 2024 consultation on the subject and provides the BoE's responses to the points raised in relation to: (i) the approach to the BoE's use of its power; (ii) the publication of directions; (iii) the approach to the resolvability assessment of CCPs; (iv) engagement with industry and other regulators; (v) the BoE's objectives; and (vi) the approach to CCP resolution publication.

In the policy statement, the BoE confirms that it still intends to publish in due course a document on its general approach to CCP resolution.

The Bank of England has published a statement of policy setting out its approach to determining commercially reasonable payments to clearing members whose contracts are subject to a statutory tear up in CCP resolution, together with a policy statement responding to feedback received to the BoE consultation paper on the subject.

Respondents were generally supportive of the proposals in the consultation paper, while recognizing the challenging circumstances in which a statutory tear up may occur. The policy statement summarizes the feedback received and provides the BoE's responses to the points raised in relation to: (i) CCPs' role in proposing prices for torn up contracts; (ii) responsibility for determining a commercially reasonable price; (iii) definition of a commercially reasonable price; (iv) CCPs' incentives when proposing prices; (v) access to pricing information in stressed market conditions; (vi) benefits to the high bar for deviating from CCPs' proposed prices; (vii) determining an alternative price; (viii) scope of a statutory tear up; and (ix) the BoE's approach to CCP resolution.

The BoE statement of policy entered into effect from December 19, 2024. In the policy statement, the BoE confirms that it still intends to publish in due course a document on its approach to CCP resolution.

HM Treasury has published its letter inviting Adam Plainer to lead an independent review of the Payment and Electronic Money Institution Insolvency Regulations 2021 (PESAR). HM Treasury also published the PESAR terms of reference, setting out the scope of the review. HM Treasury is required to appoint a reviewer to consider how the PESAR regime has been embedded and is working in practice. The PESAR regime was introduced to bring in new objectives to mitigate against administrators of payment and electronic money firms causing delays in customers gaining access to their funds. The reviewer will produce a report to be laid before Parliament. Submissions of evidence may be submitted until May 30, 2025.

The Financial Stability Board has published its resolution report for 2024. The report takes stock of the FSB resolution-related work of the past year as well as of the progress made by FSB members in implementing resolution reforms and enhancing resolvability across the banking, financial market infrastructure, and insurance sectors. It also sets out the FSB's 2025 priorities in the resolution area and outlines the work the FSB is undertaking to address the remaining lessons from the 2023 bank failures and to advance the resolution framework for insurers and central counterparties. Ensuring an effective resolution framework for the banking sector has been a significant focus for the FSB. The bank failures in 2023 provided several lessons for resolution planning and for the broader elements of the crisis management framework for banks. In the coming year, the FSB will continue to address areas that remain outstanding, specifically: (i) advancing the work on operationalizing the use of transfer tools in resolution; (ii) sharing information and enhancing monitoring of implementation of public sector backstop funding mechanisms; (iii) supporting the work on open bank bail-in execution and securities law compliance building on the 2024 technical work; and (iv) promoting cross-border cooperation and information sharing with authorities outside of crisis management groups.

Press release

The Bank of England has published a consultation paper on the proposed revocation of the U.K. technical standards on simplified obligations. The U.K. retained the EU framework for determining the level of information required within recovery and resolution plans, including the process set down by these technical standards to determine whether simplified obligations can be imposed for RRPs. The BoE explains that the assessment prescribed in the Technical Standards identifies the same firms as the process that results in the setting of a preferred resolution strategy of modified insolvency. The BoE considers that the same outcomes are achievable using this more efficient, existing process and avoids duplication. The ability to apply simplified obligations and any consequential benefits to firms will not be affected by this proposal; the BoE only proposes to simplify the process whereby a firm is designated as eligible for simplified obligations. The deadline for comments is February 2, 2025.

The Financial Stability Board has published a letter sent to the G20 leaders ahead of their meeting on November 18, 2024, together with the FSB 2024 annual report. The letter warns of ongoing vulnerabilities within the global financial system, illustrated by recent episodes of market turmoil and the failure of several banks and non-banks in recent years. The letter stresses the importance of effective implementation of the FSB's policies, emphasizing that authorities must not only put policies into national laws and regulations, but also build the capacity to operationalize them.

In the annual report, the FSB provides an overview of its work in its key priority areas, which include: (i) addressing lessons from the March 2023 banking turmoil; (ii) enhancing the resilience of non-bank financial intermediation; (iii) addressing financial risks from climate change; (iv) improving cross-border payments; (v) responding to technological innovation; and (vi) enhancing the resolvability of central counterparties. Looking ahead, the FSB will continue to focus on these priority areas and will also place an emphasis on: (a) implementation monitoring of its recommendations on crypto-asset activities and global stablecoin arrangements; (b) further work on resolution reforms; and (c) regular monitoring and progress reports on financial stability issues.

For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets.

The Financial Services and Markets Act 2023 (Consequential Amendments) Regulations 2024 have been published, with an accompanying explanatory memorandum. Regulations 3 to 7 make consequential amendments in connection with the Financial Services and Markets Act 2023 (Commencement No. 8) Regulations 2024, which bring into force several paragraphs of Schedule 2 to FSMA 2023, granting the Financial Conduct Authority the power to make rules in relation to pre- and post-trade transparency obligations and systematic internalisers.

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The Financial Stability Board has published a report on depositor behaviour and interest rate and liquidity risks in the financial system. The report draws on lessons from the March 2023 banking turmoil which saw the collapse of several banks, triggered by the confluence of interest rate increases and solvency and liquidity risks. The report identifies life insurers, non-bank real estate investors and banks as most vulnerable to solvency and liquidity risks. These entity types typically have a high proportion of interest rate-sensitive assets and liabilities and are affected by higher rates through various solvency and liquidity risk channels. It also observes that social media may have influenced some of the March 2023 bank runs, along with technological advancements that make it easier and quicker to transfer deposits.

The report finds that the speed of the recent runs means that banks and authorities may need to: (i) be able to react much more quickly to deposit outflows than in the past; (ii) find ways to address the liquidity and solvency vulnerabilities that gave rise to such extreme outflows; and (iii) consider whether monitoring of social media could be helpful as an early warning tool to flag potential stress at a bank or wider turmoil that might affect banks. Consideration could also be given to gathering and publishing data on bank deposits and unrealized losses on bank securities portfolios.

HM Treasury has published a draft new chapter for the Special Resolution Regime Code of Practice that reflects reforms introduced by the Bank Resolution (Recapitalisation) Bill. This draft chapter sets out how the recapitalization mechanism will be used, including the firms that are in scope, how the Bank of England will determine the funds required from the Financial Services Compensation Scheme and assess the relative costs of using the mechanism compared to insolvency, and the Bank of England's accountability. It also clarifies certain aspects of the policy, following the U.K. Government's engagement with industry and Parliament. HM Treasury explains that the draft chapter may change, including as a result of any amendments made to the Bill during the parliamentary process and consultation with the Banking Liaison Panel. The Government intends to issue a finalized version of the Code in full when the Bill comes into force.

The Bank of England has published a consultation paper on amendments to its statement of policy on setting the minimum requirement for own funds and eligible liabilities. The proposals are designed to ensure that the U.K.'s MREL framework: (i) is simplified and consolidated where possible, to make it easier to navigate and implement; (ii) keeps up to date with, and is responsive to, wider developments in financial regulation and markets; (iii) remains aligned with international standards; and (iv) adapts over time to reflect lessons learnt from its implementation.

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The Basel Committee on Banking Standards has published a progress report on the 2023 banking turmoil and liquidity risk. The report, requested by the G20 Brazilian Presidency, provides an update on the Basel Committee's analytical work on liquidity risk dynamics observed during the turmoil, building on the Committee's stocktake report published in October 2023. The report includes updated empirical analysis on a range of liquidity-related issues highlighted by the turmoil, including distressed banks' outflow rates, the materiality of different liquidity risk factors, and the role and use of supervisory monitoring tools. Drawing on the findings of this progress report, the Basel Committee plans to pursue a series of follow-up initiatives related to the turmoil, including: (i) prioritizing work to strengthen supervisory effectiveness and identify issues that could merit additional guidance at a global level; and (ii) pursuing additional follow-up analytical work based on empirical evidence to assess whether specific features of the Basel Framework, such as liquidity risk and interest rate risk in the banking book, performed as intended during the turmoil and assess the need to explore policy options over the medium term.

The Single Resolution Board has published a communication on the changes to its minimum requirements for own funds and eligible liabilities policy to be implemented in line with the "Daisy Chains Directive" (Directive (EU) 2024/1174). That Directive amended the Single Resolution Mechanism Regulation and the Bank Recovery and Resolution Directive. The changes brought in by the Daisy Chains Directive mean that from November 14, 2024, the SRB will not determine the MREL for liquidation entities unless it considers it justifiable to set an amount exceeding the amount sufficient to absorb losses. In addition, provisions of the Capital Requirements Regulation under which resolution authorities may allow, subject to certain conditions being met, institutions to reduce eligible liabilities instruments, will not apply to liquidation entities for which the SRB has not determined MREL. As a result, reporting and disclosure obligations do not apply to the liquidation entities for which the SRB does not determine MREL.

The SRB confirms that the previously adopted decisions setting MREL at the level equal to the loss absorption amount will be repealed with effect as of November 14, 2024. Furthermore, the prior permissions granted to the same liquidation entities under CRR and the related process set out in Delegated Regulation (EU) 241/20146 with validity beyond November 14, 2024 are repealed as of the same date. This means that relevant liquidation entities will no longer be limited by the prior permissions and will be in the position to reduce eligible liabilities instruments without the SRB's prior permission.

The European Banking Authority published its 2025 European Resolution Examination Programme report. The report sets three priorities for resolution authorities and banks for 2025 and looks at the progress achieved in 2023, identifying any areas of improvement. In 2023, convergence increased within the EU with regards to resolution planning practices and objectives: (i) on the minimum requirement for own funds and eligible liabilities, only four banks did not meet their target as of 1 January 2024; (ii) on the operationalization of the bail-in tool, most resolution authorities have now published their bail-in mechanics and consider that certain challenges (e.g., the identification of holders of instruments, suspension of trading and requirements for issuing prospectuses for the new instruments) persist and are particularly prominent in relation to third country stakeholders; (iii) while some progress has been observed in the area of liquidity in resolution, resolution authorities plan to further increase the intensity of their testing and to challenge the severity of banks' scenarios; and (iv) resolution authorities have performed further testing of management information systems for valuation as some banks showed significant gaps in data quality, automation, granularity and timeliness of report delivery.

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The Bank of England has published the findings from its second assessment of the eight major U.K. banks under the Resolvability Assessment Framework. The assessment finds that the major U.K. banks have continued to make progress in improving their preparations for resolution, including embedding resolution preparations into their everyday business, and in addressing issues outstanding from the first assessment in 2022. The BoE used the second Resolvability Assessment Framework assessment to assess the major U.K. banks' progress against issues outstanding from the first assessment, and for the first time to test how their preparations for resolution work in practice. The assessment focused on one of the three outcomes major U.K. banks need to achieve to be considered resolvable: having adequate financial resources in the context of resolution. In doing so, the BoE has identified new issues, although it notes that none of these new issues are likely to impede its ability to execute a resolution. Banks are expected, as a priority, to address the feedback from this and the previous Resolvability Assessment Framework assessment and continuously maintain and improve their resolvability capabilities.

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The House of Lords Financial Services Regulation Committee announced that it has reopened the following inquiries into:

• The Financial Conduct Authority's enforcement guidance consultation (CP24/2). The deadline for responding to the call for evidence is now October 11, 2024. The Committee also confirmed that it will invite the FCA to provide oral evidence at a later date.
• The secondary international competitiveness and growth objective given to the FCA and the Prudential Regulation Authority under the Financial Services and Markets Act 2023. The deadline for comments to this call for evidence is November 29, 2024.

The calls for evidence were reopened following the Committee's reappointment on July 29, 2024. The Committee was dissolved on May 30, 2024, following the dissolution of Parliament.

Following the King' Speech, the Bank Resolution (Recapitalisation) Bill 2025-25 has been introduced to Parliament. The Bill intends to avoid additional upfront financial costs for the financial services sector, by relying on the existing Financial Services Compensation Scheme funding system where industry is only levied to pay for the costs of failure after the event. Specifically, it: (i) expands the statutory functions of the FSCS, requiring it to provide funds to the Bank of England upon request which could be used to meet certain costs arising from the use of the resolution regime to manage the failure of a bank, building society or PRA-authorized investment firm; (ii) allows for the FSCS to use its levy-raising powers to recover any funds provided to the BoE after a failure event through imposing levies on the banking sector; (iii) extends the BoE's ability, through explicit provision, to require the issuance of shares in connection with a resolution, to facilitate the BoE's use of the funds provided by the FSCS to meet a failing bank's recapitalization costs; and (iv) makes a number of minor and consequential amendments to legislation to support the measures outlined above and ensure FSCS funds can be used effectively in a resolution.

The King's speech to Parliament sets out the new government's legislative program. The government has published background briefing notes relating to the King's Speech, providing a summary of the legislation to be brought forward. The Bills announced, in relation to financial services, include:

• A Bank Resolution (Recapitalisation) Bill, which would aim to enhance the U.K.'s resolution regime, providing the Bank of England with a more flexible toolkit to respond to the failure of small banks. The Bill would expand the statutory function of the Financial Services Compensation Scheme to provide funds to the BoE upon request, to be used where necessary to support the resolution of a failing bank. The FSCS would then recover the funds provided by charging levies on the banking sector, similar to the current arrangements for funding depositor pay-outs in insolvency. Credit unions will not be in scope of this levy. The BoE will also be provided with the power to require a bank in resolution to issue new shares, facilitating the use of FSCS funds to meet a failing bank's recapitalization costs.

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The European Banking Authority has published an updated report on the monitoring of Additional Tier 1, Tier 2 and total loss absorbing capacity as well as the minimum requirement for own funds and eligible liabilities instruments of EU institutions. The update provides new guidance on the prudential valuation of non-CET1 instruments and on other aspects related to the terms and conditions of the issuances. The report builds upon the 2023 update with substantial amendments made.

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The Council of the European Union has agreed on a negotiating mandate on the review of the crisis management and deposit insurance framework for banks. The proposals consist of three pieces of legislation, the proposed texts of which the Council has also published: (i) a proposed Directive amending the EU Bank Recovery and Resolution Directive regarding early intervention measures, conditions for resolution, and financing of resolution action; (ii) a proposed Regulation amending the Single Resolution Mechanism Regulation regarding early intervention measures, conditions for resolution, and funding of resolution action; and (iii) a proposed Directive amending the EU Deposit Guarantee Scheme Directive as regards the scope of deposit protection, use of deposit guarantee schemes funds, cross-border cooperation, and transparency. In its announcement, the Council highlights its proposals, including in relation to the public interest assessment, using the DGS funds to "bridge the gap" after the minimum requirement for own funds and eligible liabilities, allowing them to subsequently unlock an intervention of the Single Resolution Fund, the hierarchy of claims, preventative and alternative measures, extraordinary public financial support, and SRB governance. As the European Parliament adopted its position in first reading on April 24, 2024, interinstitutional negotiations may now begin.

Commission Implementing Regulation 2024/1618 amending Implementing Regulation (EU) 2021/763, laying down implementing technical standards on supervisory reporting and public disclosure of MREL and TLAC, has been published in the Official Journal of the European Union. The amending ITS were created in response to changes to the EU Capital Requirements Regulation as well as to clarify requirements in response to the Single Rulebook Q&A process. In particular, the amending ITS adjust the templates and reporting instructions to reflect: (i) the requirement to deduct investments in eligible liabilities instruments of entities belonging to the same resolution group ("daisy chain" framework); (ii) the prior permission regime for buying back eligible liabilities instruments issued by the reporting entities and groups; and (iii) other minor updates to the ITS and the accompanying technical package to address some identified issues. The amending ITS will enter into force on June 27, 2024, and will apply from December 27, 2024.

The U.K. Prudential Regulation Authority has published a Dear CEO letter addressed to non-systemic U.K. banks and building societies setting out proposals for improvement on resolvability and recovery planning. The PRA's proposals are also applicable to PRA-regulated international banking subsidiaries operating in the U.K. The letter follows the PRA's recent review of the recovery planning capabilities of a sample of such firms, which found that although many firms understood the basics of recovery planning, there were significant areas for improvement, in particular the development of recovery scenarios and calculation of recovery capacity.

In particular, the PRA found that, with respect to recovery scenarios, firms were not using scenarios of sufficient severity. They are encouraged to provide analysis on how they define and calculate their point of non-viability and to ensure their recovery capacity calculation reflects the parameters of the stress. With respect to recovery capacity, firms were found not to be calculating their recovery capacity effectively and are requested to review their methodology for such calculations.

The PRA proposes to engage with firms and trade associations on the substance of the letter in H2 2024. Firms are expected to consider the PRA's proposals and update their recovery plans to meet expectations in PRA Supervisory Statement 9/17 on Recovery Planning.

HM Treasury has launched a consultation that sets out proposals for enhancing the Special Resolution Regime by introducing a new means for the Bank of England, as the U.K. resolution authority, to use stabilization powers to manage the failure of a smaller bank. The proposal arises from the lessons learned from the failure of SVB, which resulted in its U.K. subsidiary, SVB UK, becoming unviable. SVB UK was transferred to HSBC using the resolution powers of the Bank of England.

The government does not intend to remove the Bank Insolvency procedure from the SRR. However, it is believed that the SRR could be enhanced to better manage the failure of smaller banks which are not identified as systemically important but which may be collectively impacted so as to create a systemic risk for the U.K. financial markets.

Instead of insolvency, the current regime allows for a failing bank to be transferred to a bridge bank or a private owner. However, there is concern about the potential risk to taxpayers as the bank may need to be recapitalized. HM Treasury is proposing that the Bank of England should be permitted to use funds provided by the banking sector to cover the costs linked to a resolution, including those related to recapitalizing and operating the failed bank. The funds would be levied on the banking sector.

Responses to the consultation may be submitted until March 7, 2024. The government will issue its response once it has analyzed feedback to the proposals and, if appropriate, legislate to bring the proposals into effect. If the proposal proceeds, changes will also be made to the Special Resolution Regime Code of Practice.

HM Treasury has published a response to its consultation on managing the failure of systemic digital settlement asset firms. DSAs are defined broadly under the Financial Services and Markets Act 2023 as digital assets that can be used for payment, can be transferred, stored or traded electronically and use technology (e.g., distributed ledger technology) to record or store data. The FSM Act (discussed in our client note, A Boost for UK Financial Services) granted HM Treasury powers to supervise certain activities related to DSAs. This included the power to apply the Financial Market Infrastructure Special Administration Regime to systemic DSA firms (other than banks, which are covered by existing regulatory frameworks).

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The draft Resolution of Central Counterparties (Modified Application of Corporate Law and Consequential Amendments) Regulations 2023 were laid in Parliament on October 16, 2023. The draft Regulations provide for corporate law modifications and other amendments to ensure that the U.K. CCP resolution regime functions effectively. The Financial Services and Markets Act 2023 (discussed in our client note, "A Boost for U.K. Financial Services") expanded the CCP resolution regime, giving the Bank of England, as resolution authority, additional powers to safely resolve a failing CCP. Most of the provisions of the expanded regime entered into force on August 29, 2023, under the first commencement regulations made under the FSM Act. Using powers conferred by the FSM Act, HM Treasury, through the draft Regulations, aims to ensure legal certainty and coherence by amending provisions of existing legislation, such as the Companies Act 2006 and the Bank Recovery and Resolution (No.2) Order 2014. The draft Regulations are intended to enter into force on December 31, 2023.

The U.K. Prudential Regulation Authority is consulting on a proposed rule and policy changes relating to the establishment and maintenance of third-country branches and subsidiaries within ring-fenced banking groups. The PRA's consultation comes out of HM Treasury's Smarter Ring-Fencing Regime consultation, in which it is proposing, among other things, to remove the ban on RFBs that prevents them from operating in or servicing customers outside the U.K. and European Economic Area. Responses to the PRA's consultation may be submitted until November 27, 2023.

The PRA is proposing to require an RFB to ensure that risks from its overseas subsidiary or branch are not material to its safety and soundness, including its ability to continue to provide core services in the U.K. and its resolvability. It also proposes to update its existing Supervisory Statement on RFBs to set out its proposed approach to assessing compliance with the new rule and determining whether there is a material risk to a RFB's stability.

HM Treasury has launched a consultation on proposed near term reforms to the U.K. ring-fencing regime—"A Smarter Ring-Fencing Regime"—and published its response to its call for evidence on the practicalities of aligning the ring-fencing and resolution regimes for banks. These potential changes to the four-year-old ring-fencing regime were announced in the government's Edinburgh Reforms, which we discuss in our client note: "UK Government Publishes Edinburgh Reforms for Financial Services."

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HM Treasury has opened a consultation on managing the failure of systemic digital settlement asset firms, including stablecoin firms. In April 2022, the U.K. government confirmed that it will bring the issuing of or the facilitating of the use of stablecoins used as a means of payment into the U.K. regulatory perimeter. Issuers of stablecoins for payments as well as other entities providing related services, including wallet providers and firms providing custody services, will be subject to regulation by the Financial Conduct Authority. The government also noted that, to manage the failure of systemic stablecoin firms, it would be considering extending the definition of a payment system to include arrangements that facilitate or control the transfer of "digital settlement assets" (DSAs). Such firms that are deemed systemically important will also be subject to supervision by the Bank of England, meaning that they will be authorized by the FCA and recognized by the Bank of England, and the Bank will be the lead prudential regulator.

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