On 15 October 2024, the Bank of England (BoE) published a consultation paper on amendments to its approach to setting a minimum requirement for own funds and eligible liabilities (MREL).

The proposals

The consultation brings together proposals relating to the BoE’s statement of policy on its approach to setting MREL (the MREL SoP). The proposed changes to the MREL SoP are intended to ensure that the UK’s MREL framework:

  • Is simplified and consolidated where possible, to make it easier to navigate and implement.
  • Keeps up to date with, and is responsive to, wider developments in financial regulation and markets.
  • Remains aligned with international standards.
  • Adapts over time to reflect lessons learned from its implementation.

The BoE groups the proposals around three themes:

  • Restating, with modifications, certain UK Capital Requirements Regulation total loss-absorbing capacity provisions in the MREL SoP and other related changes.
  • Updates to the BoE’s indicative thresholds for setting a stabilisation power preferred resolution strategy.
  • Revisions to reflect findings from the second assessment of the BoE’s Resolvability Assessment Framework for major UK firms (which was published on 6 August 2024) and other lessons from policy implementation.

Next steps

The deadline for responses to the consultation is 15 January 2025.

Ministerial statement on the consultation

HM Treasury (HMT) has published a ministerial statement welcoming the consultation and setting out its expectations in relation to the interaction between the policy in the consultation and the Bank Resolution (Recapitalisation) Bill. In particular, HMT welcomes the BoE’s proposal to take the new mechanism for recapitalisation into account when setting MREL for firms with a preferred transfer resolution strategy, which it says will contribute towards ensuring the MREL regime is proportionate while remaining consistent with the Government’s intention that the mechanism is primarily focused on the resolution of smaller banks.

HMT notes that one of the BoE’s MREL proposals will require changes to secondary legislation, so the Government will engage will industry on the necessary changes.