On 6 August 2024, the Bank of England (BoE) published its second assessment of the eight major UK banks’ preparations for resolution under the Resolvability Assessment Framework (RAF). The assessment is intended to give further reassurance that if a major UK bank were to fail today it could enter resolution safely, remaining open and continuing to provide vital banking services, with shareholders and investors (rather than public funds) first in line to bear the costs of failure.

In this second RAF assessment, the BoE assessed major banks’ progress against issues outstanding from the first assessment, and for the first time tested how their preparations for resolution work in practice. In doing so it focussed on one of the three outcomes that major banks must achieve to be considered resolvable – having adequate financial resources in the context of resolution.

The BoE’s assessment find that major UK banks have continued to make progress to improve their preparations for resolution, including embedding resolution preparations into their everyday business, and to address issues outstanding from the first assessment (which took place in 2022). As this was a more detailed assessment conducted by the BoE, and due to the work done by firms themselves to test their capabilities, this second assessment has identified new issues, but the BoE notes that none of these issues are likely to impede the BoE’s ability to execute a resolution. The BoE explains that further improvements in the areas identified in the assessment will help smooth the execution of a resolution.

Looking ahead, the BoE flags that:

• Future RAF assessments will be used to undertake further detailed analysis of the major UK banks.
• The next assessment will focus on the continuity and restructuring outcome, including an assessment of the readiness of the major UK banks to quickly plan for and execute restructuring options to address the causes of failure and restore viability.
• The Prudential Regulation Authority will consult on the necessary rules changes to postpone the third RAF assessment (due to take place in 2025-26) by one year to 2026-27, in light of progress made to date on resolvability and to give the BoE and major UK banks time to further enhance and progress testing of their resolution capabilities.
• The BoE will engage with the major UK banks over the coming months on their workplans and anticipated areas of focus during this period, so that progress on resolvability continues to be maintained.