HM Treasury has published a revised version of the Banking Act 2009 (the Act) special resolution regime (SRR) code of practice (the Code). The Code, issued in accordance with sections 5 and 6 of the Act, supports the legal framework of the SRR, and provides guidance as to how and in what circumstances the authorities will use the special resolution tools. Section 1 of the Code deals with banks, building societies, investment firms and banking group companies while section 2 deals with central counterparties.

The Code was updated to reflect both changes to the Act following the implementation of the Bank Recovery and Resolution Directive and also changes in the regulatory architecture, with the creation of the PRA and FCA. It has been updated further to reflect changes following the Bank Recovery and Resolution Order 2016.

The Code sets out guidance on:

  • the mandatory write-down and conversion of capital instruments;
  • how the special resolution objectives are to be understood and achieved;
  • the choice between different resolution options;
  • the information to be provided as part of any consultation between the authorities and the giving of advice between one authority and another;
  • the giving of advice by one relevant authority to another about whether, when and how the stabilisation powers are to be used;
  • how to determine whether condition 2 in section 7 of the Act is met (this condition stipulates that, before a banking institution can be placed into the SRR, the Bank of England must have determined that it is not reasonably likely that action will be taken by or in respect of the institution that will mean it is no longer failing or likely to fail);
  • how to determine whether the test for the use of stabilisation powers in section 7 is satisfied (i.e. how the Bank of England will determine the public interest test for the use of the private sector purchaser, bridge bank, bail-in and asset management vehicle stabilisation options will be satisfied);
  • the management and control of asset management vehicles;
  • sections 63 and 66 of the Act (general continuity obligations, i.e. the continuity of provision of service and facilities where the transfer powers are used); and
  • compensation that may be payable as a result of the use of the SRR.

HM Treasury will update the Code on a periodic basis and will consult the Bank of England, PRA, FCA and the Financial Services Compensation Scheme on any changes. When making material changes to the Code, HM Treasury will also consult the Banking Liaison Panel, which has the statutory remit to advise HM Treasury under section 10(2)(b) of the Act.

View HM Treasury revises special resolution regime code of practice, 27 March 2017