The Bank of England (BoE) has published an approach document which describes the framework that is available to it to resolve failing banks, building societies and certain types of investment firm.
The first part of the approach document outlines the aims of resolution and describes the key features of the UK’s resolution regime. The second part sets out how the BoE expects to carry out the resolution of a failing firm in practice, using the powers available to it as the UK resolution authority.
The approach document sets out three key stages of resolution which firms would go through. These are:
- stabilisation phase. Once a firm has entered resolution, the BoE must decide on the most appropriate method to stabilise the firm. This may be through transferring some of its business to a third party or through bail-in to recapitalise the failed firm;
- restructuring phase. Once the firm has been stabilised, it will need to restructure to address the causes of failure and restore confidence; and
- exit from resolution. This is the end of the BoE’s involvement with a firm in resolution – either the firm will cease to exist or it will be restructured and no longer require liquidity support.
View BoE sets out how it will resolve failed institutions, 23 October 2014
