Bank Resolution (Recapitalisation) Act 2025

COMMONS AMENDMENT 1

Clause 1, page 1, line 21, leave out subsection (3)

COMMONS AMENDMENT 2

Clause 8, page 6, line 1, leave out subsection (5)

3

Clause 1, page 1, line 22, at end insert—
“(3A) No application to the scheme manager for recapitalisation payments may be considered by the Bank of England for a financial institution which has been directed to maintain an end-state Minimum Requirement for Own Funds and Eligible Liabilities (MREL) exceeding minimum capital requirements, unless permission has been given, through regulations, by the Chancellor of the Exchequer.
(3B) Regulations made by the Chancellor of the Exchequer, subject to subsection (4), shall be made through Statutory Instrument under the negative procedure.”

This amendment would ensure financial institutions that maintain an end-state Minimum Requirement for Own Funds and Eligible Liabilities exceeding minimum capital requirements are excluded from the provisions of the Bill, unless permission has been given through regulations.

4

Clause 1, page 2, line 3, at end insert—
“(5A) As a further objective to the special resolution objectives in section 4 of the Banking Act 2009, when discharging its functions in respect of the exercise of recapitalisation payments under this section, the Bank of England must observe the competitiveness and growth objective.
(5B) The competitiveness and growth objective is facilitating, subject to aligning with relevant international standards—
(a) the international competitiveness of the economy of the United Kingdom, and
(b) its growth in the medium to long term.”

This amendment would place a further objective on the Bank of England to consider the competitiveness and growth of the market before directing the recapitalisation of failing small banks through a levy on the banking sector.

NC1

To move the following Clause—
“MREL limits in line with inflation
(1) The Banking Act 2009 is amended is follows.
(2) Chapter 2, section 3A, after subsection (4B)(b) insert—
“(4BA) The minimum requirement for own funds and eligible liabilities (MREL) thresholds, as determined by the Bank of England under this Act, shall be adjusted every three years to reflect changes in the Retail Price Index (RPI) or any other measure of inflation as specified by the Treasury in regulations. This will be backdated to when the limits were first introduced.”
(3) Chapter 3, section 12AA, after subsection (2) insert—
“(2A) The Bank of England shall ensure that adjustments to MREL thresholds under Chapter 2 subsection (4B) are implemented by the first day of the financial year every three years, following publication of the inflation rate for the preceding calendar year.””

This new clause requires that the minimum requirement for own funds and eligible liabilities (MREL) thresholds increase annually in line with inflation, as measured by the Retail Price Index or another inflation metric specified by the Treasury.

NC2

To move the following Clause—
“Linking FSCS to inflation
(1) The Financial Services and Markets Act 2000 is amended as follows.
(2) After section 218 insert—
“218ZZA Adjustment of compensation limits for inflation
(1) The maximum compensation limit for consumer deposits under the Financial Services Compensation Scheme, as specified in rules made by the Prudential Regulation Authority under this Part, shall be adjusted annually to reflect changes in the Retail Price Index (RPI) or another inflation measure specified by the Treasury.
(2) The adjustment under subsection (a) shall take effect on 1 April of each year, based on the RPI rate for the preceding calendar year as published by the Office for National Statistics.
(3) The Prudential Regulation Authority shall publish the revised compensation limit no later than 31 January of each year.
(4) The Treasury may, by regulations, specify alternative inflation measures or methodologies for calculating adjustments if deemed necessary.””

This new clause ensures that the maximum compensation limit for consumer deposits protected under the Financial Services Compensation Scheme (FSCS) increases annually in line with inflation.

NC3

To move the following Clause—
“Credit Unions accessing Bank of England liquidity facilities
(1) The Chancellor of the Exchequer must, within twelve months of this Act coming into force, prepare and lay before Parliament a report on the impact of this Act on credit unions.
(2) The report must include—
(a) an assessment of the arguments for granting credit unions access to Bank of England liquidity facilities, considering their similarity to small building societies;
(b) an analysis of the competitive disadvantages faced by credit unions compared to start-up banks, particularly concerning access to liquidity and resolution mechanisms;
(c) recommendations for any legislative or regulatory changes to support the stability and competitiveness of credit unions.”

This new clause requires the Chancellor of the Exchequer to prepare a report on the impact of the Bank Resolution (Recapitalisation) Act on credit unions.

1

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank of England must not require the scheme manager to make a recapitalisation payment if it has directed the financial institution to maintain an end-state Minimum Requirement for Own Funds and Eligible Liabilities (MREL) exceeding minimum capital requirements.”

This amendment seeks to prohibit the use of FSCS funds to recapitalise large financial institutions, defined as those which have reached end-state MREL.

2

Clause 5, page 4, line 14, at end insert—
“(2B) The code must include guidance to the Bank of England on the exercise of its functions in relation to building societies to ensure that, in circumstances where the use of a recapitalisation power may result in demutualisation, due consideration is given to the impact of such demutualisation on members and on the mutuals sector.
(2C) In preparing the guidance required under subsection (2B), the Treasury shall consider the feasibility of selecting a purchaser from the mutuals sector as a means of avoiding demutualisation, provided such a purchaser meets the resolution objectives.”

This amendment seeks to ensure that, where possible, the selection of a purchaser from the mutuals sector is considered to avoid demutualisation, provided this aligns with the Bank's resolution objectives.

1

Clause 1, page 1, line 21, leave out subsection (3)

This amendment would remove subsection (3), which prevents recapitalisation payments from being required where the Bank has directed a financial institution to maintain an end-state minimum requirement for own funds and eligible liabilities exceeding minimum capital requirements.

3

Clause 1, page 1, line 24, at end insert—
“(3A) No application to the scheme manager for recapitalisation payments may be considered by the Bank of England for a financial institution which has been directed to maintain an end-state Minimum Requirement for Own Funds and Eligible Liabilities (MREL) exceeding minimum capital requirements, unless permission has been given, through regulations, by the Chancellor of the Exchequer.
(3B) Regulations made by the Chancellor of the Exchequer, subject to subsection (4), shall be made through Statutory Instrument under the negative procedure.”

This amendment would ensure financial institutions that maintain an end-state Minimum Requirement for Own Funds and Eligible Liabilities exceeding minimum capital requirements are excluded from the provisions of the Bill, unless permission has been given through regulations.

4

Clause 1, page 2, line 3, at end insert—
“(5A) As a further objective to the special resolution objectives in section 4 of the Banking Act 2009, when discharging its functions in respect of the exercise of recapitalisation payments under this section, the Bank of England must observe the competitiveness and growth objective.
(5B) The competitiveness and growth objective is facilitating, subject to aligning with relevant international standards—
(a) the international competitiveness of the economy of the United Kingdom, and
(b) its growth in the medium to long term.”

This amendment would place a further objective on the Bank of England to consider the competitiveness and growth of the market before directing the recapitalisation of failing small banks through a levy on the banking sector.

2

Clause 8, page 6, line 1, leave out subsection (5)

This amendment removes the privilege amendment inserted by the House of Lords.

1

Clause 1, page 1, line 21, leave out subsection (3)

2

Clause 8, page 6, line 1, leave out subsection (5)

11

In inserted subsection (2) leave out paragraph (b) and insert—
“(b) the Financial Services Regulation Committee of the House of Lords”

12

In inserted subsection (3), leave out “The reference to the Treasury Committee of the House of Commons” and insert “A reference to a committee in subsection (2)”

13

In inserted subsection (4), at end insert “, in relation to committees of the House of Commons, and
(b) the Chairman of Committees of the House of Lords, in relation to committees of the House of Lords.”

2

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank of England must not require the scheme manager to make a recapitalisation payment if it has directed the financial institution to maintain an end-state Minimum Requirement for Own Funds and Eligible Liabilities (MREL) exceeding minimum capital requirements.”

This amendment seeks to prohibit the use of FSCS funds to recapitalise large financial institutions, defined as those which have reached end-state MREL.

3

Clause 1, page 1, line 22, at end insert—
“(3A) Before exercising the power in subsection (1), the Bank and the scheme manager must assess whether they consider that there should be a clawback of any part of executive remuneration from the previous 12 months.”

This amendment seeks to address potential moral hazards through requiring the Bank and scheme manager to take directors’ pay and bonuses into consideration when a recapitalisation payment is made.

9

After inserted subsection (5) insert—
“(5A) Unless already covered by the final report under subsection (3), the Bank must make a further report to the Chancellor of the Exchequer within three months of the date of the sale to a private sector purchaser of the financial institution to which the recapitalisation payment relates, or the sale, closure or winding up of the financial institution or bridge bank to which the recapitalisation payment relates, complying with such requirements as to content as the Treasury may specify.”

Clause 1, page 2, line 3, at end insert - “214EA Engagement with Parliamentary Committees (1) If the Bank of England exercises the power under section 214E it must, as soon as reasonably practicable, notify in writing the chair of each relevant Parliamentary Committee that the power has been exercised. (2) Relevant Parliamentary Committees are – (a) the Treasury Committee in the House of Commons, and (b) the Financial Services Regulation Committee in the House of Lords. (3) References to the committees referred to in subsection (2) - (a) if the name of the Committee is changed, are references to that Committee by its new name, and (b) if the function of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons or the House of Lords, are to be treated as references to the Committee by which the functions are exercisable. (4) Any question arising under subsection (3) is to be determined by the Speaker of the House of Commons in relation to committees of the House of Commons and by the Senior Deputy Speaker of the House of Lords in relation to committees of the House of Lords."

After Clause 1, insert the following new Clause- "Notification to Parliamentary Committees In the Financial Services and Markets Act 2000, after section 214EA (as inserted by section (Reporting) of this Act) insert- "214EB Notification to Parliamentary Committees (1) Where the Bank of England requires the scheme manager to make a recapitalisation payment under section 214E, the Bank must, as soon as reasonably practicable, notify in writing the chair of each relevant Parliamentary Committee that it has done so. (2) The relevant Parliamentary Committees are (a) the Treasury Committee of the House of Commons, and (b) the Committee of the House of Lords which- (i) is charged with responsibility by that House for the purposes of this section, and (ii) has notified the Bank that it is a relevant Parliamentary Committee for those purposes. (3) The reference to the Treasury Committee of the House of Commons — (a) if the name of that committee is changed, is to be treated as a reference to that committee by its new name, and (b) if the functions of that committee (or substantially corresponding functions) become functions of a different committee, is to be treated as a reference to the committee by which those functions are exercisable. (4) Any question arising under subsection (3) is to be determined by the Speaker of the House of Commons.”

1

Clause 1, page 1, line 18, leave out “another” and insert “a relevant”

See the explanatory statement for my second amendment to Clause 1.

4

Clause 1, page 1, line 25, at end insert—
“(4A) In subsection (2)(b), “relevant person” means—
(a) the Treasury,
(b) a bridge bank, or
(c) an asset management vehicle.
(4B) In this section, “bridge bank” and “asset management vehicle” have the meanings given by sections 12 and 12ZA, respectively, of the Banking Act 2009.”

This amendment, together with my first amendment to Clause 1, clarifies the persons (in addition to the Bank of England) in respect of whose expenses a recapitalisation payment may be made.

8

After Clause 1, insert the following new Clause—
“Reporting
In the Financial Services and Markets Act 2000, after section 214E (as inserted by section 1 of this Act) insert—
“214EA Recapitalisation payment: report
(1) This section applies where the Bank of England requires the scheme manager to make a recapitalisation payment under section 214E.
(2) The Bank must report to the Chancellor of the Exchequer about—
(a) the exercise of the power to require a recapitalisation payment to be made, and
(b) the stabilisation power and the stabilisation option to which the payment relates.
(3) The report (“the final report”) must—
(a) comply with such requirements as to content, and
(b) be provided within such period or at such time,
as the Treasury may specify.
(4) The Bank must provide an interim report if—
(a) the period specified under
subsection (3)(b)
is a period of more than 3 months beginning with the day on which the Bank requires the recapitalisation payment in question (“the first 3 months”), or the time specified under
subsection (3)(b)
is after the first 3 months, and
(b) the Bank does not provide the final report within the first 3 months.
(5) An interim report must—
(a) comply with such requirements as to content as the Treasury may specify, and
(b) be provided within the first 3 months.
(6) Subject to subsection (7), the Chancellor of the Exchequer must lay each report, and any interim report, before Parliament.
(7) The Chancellor of the Exchequer may omit from the report, and any interim report, any information which the Chancellor of the Exchequer considers it would not be in the public interest to publish.””

This new Clause imposes a reporting requirement on the Bank of England when it requires a recapitalisation payment to be made.

10

After Clause 1, insert the following new Clause—
“Notification to Parliamentary Committees
In the Financial Services and Markets Act 2000, after section 214EA (as inserted by section (Reporting) of this Act) insert—”
Any question arising under subsection (3) is to be determined by the Speaker of the House of Commons.””

This new Clause requires the Bank of England to notify relevant Parliamentary Committees when it requires a recapitalisation payment to be made.

14

After Clause 2, insert the following new Clause—
“Code of practice
In the Banking Act 2009, in section 5 (code of practice), after subsection (2) insert—
“(2A) The code must include guidance on the contents of a report, and of any interim report, under section 214EA of that Act (recapitalisation payment: report).””

This new Clause require the Treasury to include, in a code of practice under section 5 of the Banking Act 2009, provision relating to the content of reports about recapitalisation payments.

6

Clause 1, page 2, line 3, at end insert—
“(6) When discharging its functions in respect of the exercise of recapitalisation payments under this section, the Bank of England must observe the competitiveness and growth objective.
(7) The competitiveness and growth objective is facilitating, subject to aligning with relevant international standards—
(a) the international competitiveness of the economy of the United Kingdom (including in particular the financial services sector), and
(b) its growth in the medium to long term.”

7

Clause 1, page 2, line 3, at end insert—
“(6) As a secondary objective to the special resolution objectives in section 4 of the Banking Act 2009, when discharging its functions in respect of the exercise of recapitalisation payments under this section, the Bank of England must observe the competitiveness and growth objective.
(7) The competitiveness and growth objective is facilitating, subject to aligning with relevant international standards—
(a) the international competitiveness of the economy of the United Kingdom, and
(b) its growth in the medium to long term.”

16

Clause 4, page 3, line 15, at end insert—
“(2A) In section 4 (special resolution objectives), after subsection (9) insert—
“(9A) Objective 8, which applies in any case in which the Bank of England uses the power in section 214E of the Financial Services and Markets Act 2000 (recapitalisation payments), is to ensure that the costs which are borne through the Financial Services Compensation Scheme are minimised.””

This amendment adds to the special resolution objectives so that the Bank of England has to consider minimising the net costs recouped from the banking sector via the FSCS.

[Withdrawn]
Clause 1, page 2, line 3, at end insert—
“214EA Engagement with Parliamentary Committees
(1) If the Bank of England exercises the power under section 214E it must, as soon as reasonably practicable, notify in writing the chair of each relevant Parliamentary Committee that the power has been exercised.
(2) Relevant Parliamentary Committees are—
(a) the Treasury Committee in the House of Commons, and
(b) the Financial Services Regulation Committee in the House of Lords.
(3) References to the committees referred to in subsection (2)—
(a) if the name of the Committee is changed, are references to that Committee by its new name, and
(b) if the function of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons or the House of Lords, are to be treated as references to the Committee by which the functions are exercisable.
(4) Any question arising under subsection (3) is to be determined by the Speaker of the House of Commons in relation to committees of the House of Commons and by the Senior Deputy Speaker of the House of Lords in relation to committees of the House of Lords.”

This amendment provides that the Bank of England must notify the Treasury Committee of the House of Commons and the Financial Services Regulation Committee in the House of Lords if the recapitalisation power is used.

5

Clause 1, page 2, line 3, at end insert—
“(6) When the Bank exercises its power in subsection (1), the Bank must make a report to the Chancellor of the Exchequer within 28 days of the date of any recapitalisation payment being made.
(7) The report must comply with any requirements specified by the Treasury, but must include—
(a) the reasons why the Bank decided to make a recapitalisation payment in preference to allowing the financial institution to go into insolvency;
(b) a breakdown of the costs referred to in subsection (2);
(c) a comparison of the expected recapitalisation payment or payments that will be paid by the Financial Services Compensation Scheme, compared with the expected costs to the Scheme in an insolvency process.
(8) The Bank must make a further report to the Chancellor of the Exchequer within three months of the date of the sale of the institution to a private sector purchaser, or the sale, closure or winding up of the institution or bridge bank, providing such information as the Treasury may require, including the breakdown of the actual recapitalisation payment or payments and the reasons for any differences to the expected costs referred to in subsection (7)(b).
(9) The Chancellor of the Exchequer must lay a copy of each report under subsection (7) or (8) before Parliament.”

This amendment is intended to ensure that the reasons for decisions of the Bank to follow a resolution process in preference to an insolvency process are explained and the explanation laid before Parliament, both at the time of the decision and once the resolution process has been completed, and that the costs can be compared to what would have been expected if the institution had been placed into insolvency.

15

After Clause 2, insert the following new Clause—
“Treatment of recapitalisation payments on a winding up
(1) In section 215 of the Financial Services and Markets Act 2000 (rights of the scheme in insolvency), after subsection (2A), insert—
“(2AB) Any recapitalisation payment made by the scheme manager under section 214E in respect of a bank, building society or investment firm is to be treated, in the event of such bank, building society or investment firm or associated bridge bank being wound up, as a debt due to the scheme manager from that bank, building society or (as the case may be) investment firm.”
(2) In Schedule 6 of the Insolvency Act 1986 (categories of preferential debts), after paragraph 15AA, insert—
“15AB Any debt owed by the debtor to the scheme manager of the Financial Services Compensation Scheme under section 215(2AB) of the Financial Services and Markets Act 2000.””

This amendment creates a mechanism that would allow the FSCS to recover its money in preference to creditors who would otherwise have no right to be bailed out. This mirrors the existing treatment of stabilisation payments made by the FSCS in Clause 215 (2A) of FSMA 2000.

8

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank of England must not require the scheme manager to make a recapitalisation payment if it has directed the financial institution to maintain a Minimum Requirement for Own Funds and Eligible Liabilities (MREL) or issue eligible liabilities.”

This amendment seeks to limit the use of FSCS funds for recapitalisation to small financial institutions.

9

Clause 1, page 1, line 22, at end insert—
“(3A) Before exercising the power in subsection (1), the Bank and the scheme manager must assess whether they consider that there should be a clawback of executive pay and bonuses from the previous 12 months.”

This amendment seeks to address potential moral hazards through requiring the Bank and scheme manager to take directors’ pay and bonuses into consideration when a recapitalisation payment is made.

11

Clause 1, page 2, line 3, after “2009)”, insert “that is not required to hold the Minimum Requirement for own funds and Eligible Liabilities (MREL) above minimum capital requirements.”

The amendment would confine the scheme to small banks.

12

Clause 1, page 2, line 3, at end insert—
“(6) When the Bank of England exercises its power in subsection (1), the Bank must make a report to the Chancellor of the Exchequer within 28 days of the date of any recapitalisation payment being made.
(7) The report must comply with any requirements as requested by the Treasury, but must include—
(a) the reasons why the Bank decided to make a recapitalisation payment in preference to allowing the financial institution to go into insolvency;
(b) a breakdown of the costs referred to in subsection (2);
(c) a comparison of the expected recapitalisation payment or payments that will be paid by the Financial Services Compensation Scheme, compared with the expected costs to the Scheme in an insolvency process.
(8) The Bank must make further reports to the Chancellor of the Exchequer within three months of the date of the sale of the institution to a private sector purchaser, or the sale, closure or winding up of the bridge bank, providing such information as the Treasury may require, including the breakdown of the actual recapitalisation payment or payments and the reasons for any differences to the expected costs referred to in subsection (7)(b).
(9) The Chancellor of the Exchequer must lay a copy of each report under subsection (7) or (8) before Parliament.”

This amendment is intended to ensure that the reasons for decisions of the Bank to follow a resolution process in preference to an insolvency process are explained and the explanation laid before Parliament, both at the time of the decision and once the resolution process has been completed, and that the costs can be compared to what would have been expected if the institution had been placed into insolvency.

15

Clause 1, page 2, line 3, at end insert—
“214F Engagement with Parliamentary Committees
(1) If the Bank of England exercises the power under section 214E it must, as soon as reasonably practicable, notify in writing the chair of each relevant Parliamentary Committee that the power has been exercised.
(2) Relevant Parliamentary Committees are—
(a) the Treasury Committee in the House of Commons, and
(b) the Financial Services Regulation Committee in the House of Lords.
(3) References to the committees referred to in subsection (2)—
(a) if the name of the Committee is changed, are references to that Committee by its new name, and
(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons or the House of Lords, are to be treated as references to the Committee by which the functions are exercisable.
(4) Any question arising under subsection (3) is to be determined by the Speaker of the House of Commons in relation to committees of the House of Commons and by the Senior Deputy Speaker of the House of Lords in relation to committees of the House of Lords.”

This amendment provides that the Bank of England must notify the Treasury Committee of the House of Commons and the Financial Services Regulation Committee in the House of Lords if the recapitalisation power is used.

18

Clause 3, page 2, line 36, at end insert “nor on financial institutions that the Bank of England has directed to maintain a Minimum Requirement for Own Funds and Eligible Liabilities (MREL) or issue eligible liabilities.”

This probing amendment seeks to clarify the rationale for the scope of financial institutions liable to pay the levy versus those that are likely to benefit from a recapitalisation payment.

19

Clause 3, page 2, line 41, at end insert—
“(5C) The compensation scheme may not allow the scheme manager to impose levies on liable financial institutions in relation to recapitalisation payments under 214E in financial years following that in which the recapitalisation payments occurred without the consent of the Treasury.”

This probing amendment is designed to test the anticipated scale of the levy, and period of payment, in a reasonable worst case of the resolution of several financial institutions in a single financial year.

23

Clause 4, page 3, line 20, after “question” insert “and, for such a bank, the shortfall may only be reduced insofar as necessary to cover recapitalisation.”

This amendment seeks to ensure that the FSCS should only be used for recapitalisation not for bailing out shareholders.

24

Clause 4, page 3, line 39, at end insert—
“(8) In section 79A (private sector purchaser: report), at the end insert—
“(5) Where the sale to a private sector purchaser followed a recapitalisation payment under section 214E of the Financial Services and Markets Act 2000, the Chancellor of the Exchequer must lay a copy of each report under subsection (2) before Parliament.””

This amendment would require reports made by the Bank of England to the Chancellor of the Exchequer regarding the sale of all or part of a bank’s business to a commercial purchaser to be laid before Parliament, bringing this in line with the requirements that already apply when a bank’s business is transferred to a resolution company in accordance with section 80 of the Banking Act 2009.

22

Clause 4, page 3, line 16, leave out subsection (3)

25

After Clause 4, insert the following new Clause—
“Impact assessment: appropriateness of the minimum total asset value level for imposition of MREL on smaller banks
The Secretary of State must, within 12 months of the passing of this Act, publish an assessment of the impact of this Act on the appropriateness of the minimum total asset value level at which Minimum Requirement for Own Funds and Eligible Liabilities (MREL) is imposed on smaller banks.”

1

Clause 1, page 1, line 8, after “institution” insert “that is not required to hold Minimum Requirement for Own Funds and Eligible Liabilities (MREL) or is below a level of total assets of value of £15 billion index linked from 1 January 2016”

This amendment seeks to ensure that the bill applies primarily to smaller banks, using Minimum Requirement for Own Funds and Eligible Liabilities (MREL) as a definition.

2

Clause 1, page 1, line 18, leave out lines 18 to 20

This amendment probes the nature of “other expenses” and the persons other than the Bank which could incur expenses.

3

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank may not exercise the power in subsection (1) more than once in respect of the same financial institution without the consent of the Treasury.”

This amendment requires the Bank to obtain Treasury consent before it can require the FSCS to make a second (or subsequent) recapitalisation payment in respect of an individual bank.

4

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank may not exercise the power in subsection (1) in respect of a financial institution which meets the condition in subsection (2B) without the consent of the Treasury.
(2B) The condition is that the financial institution is a subsidiary of a company based outside the United Kingdom.”

This amendment requires the Bank of England to obtain Treasury consent before it can require the FSCS to make a capitalisation payment in respect of a bank which is a subsidiary of an overseas body.

5

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank may not exercise the power in subsection (1) in respect of a financial institution which meets the condition in subsection (2B) without the consent of the Treasury.
(2B) The condition is that the financial institution has been required by the Bank under subsection (4) of section 3A of the Banking Act 2009 to hold an amount of bail-in liabilities.”

This amendment requires the Bank of England to obtain Treasury consent before it can require the FSCS to make a capitalisation payment in respect of a bank which had not satisfied the Bank’s suitability for the use of the insolvency procedure in resolution.

6

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank may not exercise the power in subsection (1) without the consent of the Treasury.”

This amendment requires the Bank of England to obtain Treasury consent before it can require the FSCS to make a capitalisation payment.

7

Clause 1, page 1, line 20, at end insert—
“(2A) The Bank of England may only exercise the power in subsection (1) if it assesses that the use of the power would support the public interest, which may include but need not be limited by—
(a) supporting market competitiveness, or
(b) retaining or growing smaller banks.”

13

Clause 1, page 2, line 3, at end insert—
“(6) Use of the Financial Services Compensation Scheme for bank recapitalisation and associated costs must not reduce bank depositors’ entitlement to the full amount of Deposit Guarantee Insurance.”

14

Clause 1, page 2, line 3, at end insert—
“214F Recapitalisation payments: reporting
(1) The Bank must report to the Chancellor of the Exchequer about the exercise of the power in section 214E.
(2) The report must comply with any requirements as to content specified by the Treasury.
(3) The report must be made as soon as is practicable after the use of the power.
(4) The Treasury must lay a copy of the report before Parliament.”

This amendment ensures that that information about the use of a recapitalisation payment is made to the Treasury and to Parliament.

20

Clause 4, page 3, line 15, at end insert—
“(2A) In section 4 (special resolution objectives), at the end of subsection (9) insert—
“(9A) Objective 8, which applies in any case in which the Bank of England uses the power in section 214E of the Financial Services and Markets Act (recapitalisation payments), is to ensure that the costs which are born through the Financial Services Compensation Scheme do not exceed those which would have been born if the bank insolvency procedure had been used.””

This amendment adds to the special resolution objectives so that the Bank of England has to consider the net costs recouped via the FSCS if it uses the recapitalisation power with the counterfactual of the use of the bank insolvency procedure.

21

Clause 4, page 3, line 15, at end insert—
“(2A) In section 5 (code of practice), at the end of subsection (1) insert “and—
(iv) the bank recapitalisation power under section 214E of the Financial Services and Markets Act 2000.””

This amendment requires the Treasury to include the use of the recapitalisation power created in this Bill in the Code of Practice issued in respect of the special resolution regime.

10

Clause 1, page 2, line 3, after “2009)”, insert “excluding institutions with minimum requirements for own funds and eligible liabilities on the basis of a bail-in resolution strategy as may be identified by the Bank of England from time to time.”

This probing amendment is designed to understand why these new rules should apply to all banks, contrary to the Treasury’s consultation on Enhancing the Special Resolution Regime of January 2024. It would exclude those banks subject to requirements to hold additional funds and liabilities, known as MREL, under a bail-in strategy that is designed to cover those banks deemed “too big to fail”.

16

Clause 2, page 2, line 20, after “up” insert “or from the management or shareholders of the institution being sold or wound up”

This is a probing amendment to ascertain under what circumstances the Bank may be able to recover all or part of previously paid management bonuses, dividends to shareholders, or otherwise require a shareholder (foreign or UK) to cover all or part of the recapitalisation costs.

17

Clause 2, page 2, line 20, at end insert—
“(aa) on a winding up of the institution, any recapitalisation payment is to be treated as a debt of the institution and paid out of the institution’s assets in preference to all other claims except any prescribed fees or expenses of the official receiver;”

Because the recapitalisation payment is not paid by the FSCS to the institution, but is paid to the Bank of England, it is not clear how it would be treated on a winding up of the institution. This probing amendment aims to ensure that it is treated as a debt of the institution and to ensure that recapitalisation payments are recovered first in any insolvency process, in preference to other creditors or shareholders, other than the expenses of the receiver.

Clause 1, page 2, line 3, at end insert – "(6) When the Bank of England exercises its power in subsection (1), the Bank must make a report to the Chancellor of the Exchequer within 28 days of the date of any recapitalisation payment being made. (7) The report must comply with any requirements as requested by the Treasury, but must include - (a) the reasons why the Bank decided to make a recapitalisation payment in preference to allowing the financial institution to go into insolvency; (b) a breakdown of the costs referred to in subsection (2); (c) a comparison of the expected recapitalisation payment or payments that will be paid by the Financial Services Compensation Scheme, compared with the expected costs to the Scheme in an insolvency process. (8) The Bank must make further reports to the Chancellor of the Exchequer within three months of the date of the sale of the institution to a private sector purchaser, or the sale, closure or winding up of the bridge bank, providing such information as the Treasury may require, including the breakdown of the actual recapitalisation payment or payments and the reasons for any differences to the expected costs referred to in subsection (7)(b). (9) The Chancellor of the Exchequer must lay a copy of each report under subsection (7) or (8) before Parliament."

Clause 4, page 3, line 39, at end insert- "(8) In section 79A (private sector purchaser: report), at the end insert— “(5) The Chancellor of the Exchequer must lay a copy of each report under subsection (2) before Parliament.”””