## 1gbrea2022007

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### Executive summary — overall assessment and near-term actions
- Overall assessment:
  - The United Kingdom (U.K.) bank resolution and financial crisis readiness arrangements are sound but with opportunities for continued and accelerated enhancements.
  - Authorities’ individual and collective crisis readiness—including with other major jurisdictions—continues to improve.
  - Mid-2022, all major U.K. banks and the authorities will issue the first public statements about these banks’ resolvability.
  - The SRR and RAF for banks are comprehensive, but: further enhancements are needed (including application to CCPs), an SRR for insurance companies should be introduced, elements of the deposit insurance system and firm-specific resolution decision-making should be strengthened, and implementation and reputation risk should be addressed.
- Key near-term operational points:
  - Recommendation: Continue preparing for diverse failure scenarios, including fast-fail resolutions and concurrent failures of multiple major and mid-tier firms.
  - Public disclosures on major U.K. banks’ resolvability were expected in mid-2022.
  - The 2022 deadline for major U.K. firms to achieve RAF resolvability outcomes was maintained; the deadline for mid-tier banks was extended to 2023.

### Crisis readiness, governance, and pandemic adjustments
- Authorities’ initiatives and governance:
  - BOE: revamped crisis readiness governance, including a Heightened Contingency Framework (HCF) Project.
  - HMT: Professionalising Crisis Management (PCM) Project.
  - FCA and FSCS: undertaking similar efforts.
  - Authorities test and update crisis readiness individually and collectively, including with counterparts in the U.S. and the EU—“the three jurisdictions are home to 19 of the 30 global systemically important banks (GSIBs).”
- COVID-19 related adjustments:
  - PRA cancelled major banks’ recovery plan submission for 2020.
  - BOE and PRA extended deadlines for major banks’ resolvability reporting and disclosures, compliance with valuation capabilities, and resolution pack submissions.
  - BOE set a longer transition time for mid-tier firms to meet higher MREL.
  - The January 1, 2022 deadline for major firms to achieve RAF resolvability outcomes was not changed.

### Special Resolution Regime (SRR), RAF, and HMT role
- SRR and RAF:
  - The SRR for banks appears robust and broadly consistent with international standards; it includes modified insolvency regimes for a host of financial firms.
  - A comprehensive RAF Statement of Policy (SoP) supports authorities and firms in meeting the resolvability commitment.
  - Material foreign subsidiaries and some mid-tier banks are subject to the RAF SoP, except for reporting and public disclosure requirements.
  - Recommendation: Ensure the BOE undertakes resolvability assessments with a high degree of independence and heightened vigilance in scrutinizing banks’ RAF reporting reliability.
- HMT role and decision-making:
  - HMT plays a critical role in certain firm-specific resolution decisions and can take firms into temporary public ownership (TPO) as a last resort.
  - Concern: It is unclear how HMT’s involvement in firm-specific decisions will affect prompt and effective action, including in cross-border cases.
  - Recommendation: Support operational autonomy of the BOE and the FSCS; review and clarify the level of HMT involvement in firm-specific resolution decisions to moderate involvement to cases where public funds are at risk.

### Post-Brexit implications and opportunities
- Brexit effects:
  - U.K. exit from the EU fundamentally changed formal cooperation arrangements; U.K. authorities are no longer members of the EU’s ‘resolution colleges,’ and automatic recognition of respective resolution decisions does not apply.
  - Continued efforts to strengthen mutual trust and maintain or increase cooperation and coordination between U.K. and EU authorities will reduce cross-border legal and operational risks.
  - Brexit offers the opportunity to address EU legacies that introduced inflexibilities weakening the U.K. resolution regime.
- Recommended legal adjustments:
  - Eliminate rules that may constrain resolution funding and ensure that subsidy policies support effective resolution strategies (HMT, BOE; ¶19, ¶30). Timing: MT. Priority: H.
  - End the discriminatory treatment of overseas branch depositors in the creditor hierarchy (HMT; Appendix, item #8). Timing: NT. Priority: M.

### CCPs and insurers: gap areas and recommendations
- CCPs:
  - SRR applies, with modifications, to the three recognized U.K. CCPs (LCH, LME Clear, ICE Clear Europe).
  - The regime predates international guidance issued since 2012 and the EU CCP RRP regime was not onshored prior to Brexit.
  - HMT is considering statutory changes for an expanded CCP resolution regime with more powers for the BOE.
  - Recommendation: Finalize resolution plans for CCPs and the legislation for an expanded CCP resolution regime, including a statutory requirement for regular resolution planning; expand the RAF to CCPs. (HMT, BOE; ¶16, ¶27). Timing: MT. Priority: M.
- Insurers:
  - There is a modified insolvency regime for insurers; HMT seeks to strengthen it.
  - HMT and BOE are considering an SRR for insurers; the PRA and BOE are developing an RRP approach for insurers.
  - Recommendation: Strengthen the regime for failing insurers, introduce an RRP approach for systemically significant or critical insurers, and expand the RAF to insurers. (HMT, PRA, BOE; ¶17, ¶27). Timing: MT. Priority: M.

### Deposit insurance (FSCS) funding and recommended reforms
- Current FSCS funding features:
  - FSCS funding sources for depositor payouts or transfers: (i) annual and interim industry levies; (ii) a revolving commercial credit facility; (iii) borrowing from—and at the sole discretion of—HMT, including via the NLF, if extraordinary levies and other funding sources are exhausted.
  - FSCS collects levies on a pay-as-you-go basis—currently capped for the deposit levy class by the PRA at £1.5 billion a year—and has a small commercial borrowing facility; either would be insufficient if any of the largest 15 non-SIBs were to fail, requiring HMT/NLF support.
  - As of the 2020/21 financial year, since its introduction, the U.K. government collected £25.5 billion through the bank levy.
  - Per the SRR Code of Practice (section 11.8), the bank levy is partly used toward ex ante funding for resolution with a target level for 2024 of one percent of covered deposits.
- Recommendations:
  - Build up a prefunded FSCS deposit insurance fund with an appropriate target level—e.g., payouts for the concurrent failure of the largest 2–4 non-SIBs without a resolution strategy using the stabilization powers—and levy assessments enabling the FSCS to reach the target level within a reasonable time. (HMT, FSCS; ¶33). Timing: NT. Priority: M.
  - Expand FSCS’s financial fire power with sufficient funds under direct control and investment; an expedited timeline could be possible with start-up funding from industry resources raised with the bank levy.

### Liquidity in resolution and funding tools
- Liquidity arrangements:
  - Since 2017, a flexible Resolution Liquidity Framework (RLF) complements BOE’s Sterling Monetary Framework (SMF) and ELA arrangements.
  - RLF applies to firms when these are in a BOE-led resolution—but not to firms that are subject to insolvency or administration.
  - Liquidity expectations: first need to come from firms per RAF expectations on funding capabilities; SMF remains available to firms that meet qualification requirements; ELA can be extended to firms before or after resolution and pre-resolution ELA could be rolled into the RLF.
  - RLF scope and collateral: applies to a wide range of participants, including foreign branches and subsidiaries in a BOE-led resolution, and may be secured against a wide range of collateral.
  - Funding indemnity: BOE would highly likely request an indemnity from HMT for RLF lending; under the 2018 MOU on the ‘Financial Relationship Between HM Treasury and the Bank of England,’ HMT would assess this request on a case-by-case basis.
- Recommendation: BOE could provide more detail on the RLF when it updates its Approach to Resolution after the first round of RAF assessments.

### International cooperation, recognition of foreign actions, and crisis preparedness
- International engagement:
  - U.K. authorities contribute to FSB Resolution Steering Group work and CMG activities; BOE chairs CMGs for three GSIBs (Barclays, Standard Chartered, HSBC) and for two CCPs (Ice Clear Europe, LCH).
  - Trilateral coordination: U.K., U.S., and EU are home to 19 of the 30 GSIBs; Trilateral Principal Level Exercise (TPLE) regularly convenes GSIB resolution principals.
- Recognizing foreign resolution actions:
  - Banking Act 2009 (Part 1, Chapter 6) authorizes BOE—with HMT approval—to recognize or refuse foreign resolution actions; recognition may be refused for adverse effects on U.K. financial stability, material fiscal implications, or discrimination against creditors located or payable in the U.K.
  - BOE intends to publish guidance on the U.K. recognition regime; lessons from the May 2021 recognition related to PrivatBank inform crisis readiness projects.
- Crisis preparedness practices:
  - Four-pronged approach: Team Rotation; Training Programs; Testing and Exercising; Documenting Operations (playbooks, runbooks, manuals).
  - Recommendation: Develop similar cross-border exercises with other key jurisdictions, e.g., starting with key authorities in Asia.
  - Recommendation: undertake independent evaluations of contingency planning at HMT, FCA, FSCS to complement BOE IEO work and internal audit (all; ¶41). Timing: NT. Priority: M.

### Staffing for resolution and crisis management — current status and recommendations
- Staffing levels and structure (end-2020):
  - BOE’s Resolution Directorate (RD): 87 full-time equivalent (FTE) staff (growing from 50 FTE five years earlier).
  - HMT’s Financial Stability Group (FSG): 74 FTE staff (growing from 38 FTE five years earlier).
  - FCA’s Resolution Execution Department: 30 FTE staff.
  - RD comprises five units: Policy; Domestic Resolvability; International Resolvability; Heightened Contingency Framework; and Resolvability Assessment Framework; supported by BOE’s Legal Directorate and can draw resources across BOE and PRA.
  - FSG comprises four teams: (i) Banking Assets & Resolution Strategy; (ii) Resilience and Resolution; (iii) Structural Policy and Strategy; and (iv) Systems, Stability and Analysis.
  - Close to half of FSG staff works on resolution matters full time; HMT’s reservist program ensures that FSG staff and alumni are regularly trained and can be drafted in at short notice.
  - HMT’s Financial Services Group has about 150 FTE staff overall; HMT’s resourcing model allows for extra resources to be drawn into FSG or scaled down.
- Resourcing pressures and risk:
  - As resolvability regimes evolve, crisis readiness projects intensify and international engagements expand, staff may need to deprioritize some BAU activities.
  - When COVID-19 measures wind down, nonperforming assets may rise, putting pressures on firms.
  - Recommendation: Continue pursuing staffing resources commensurate in quantity and quality with increasing demands and ambitions (all; ¶7). Timing: C. Priority: H.

### HMT de facto and de jure influence on firm-specific resolution decisions
- Funding and decision influence:
  - Resolution funding may be sourced from a bank levy that the largest firms pay to HMT; bank levy revenues go into the Consolidated Fund and require HMT decisions for use.
  - FSCS depends on government loans for bank insolvencies when it cannot meet costs with levies, recoveries, or via its commercial borrowing facility; failing of any of the largest non-SIBs could require HMT/NLF support.
- HMT directive powers and required consents:
  - HMT consent or approval is required for a range of resolution decisions, including use of any resolution tool likely to implicate public funds; transfer to a PSP, bridge bank, or AMC of a firm that received prior government financial assistance; BOE ELA and use of the RLF (with or without indemnity); use of any resolution tool for a U.K. branch of a foreign bank; recognition of foreign resolution decisions; and imposing special continuity obligations on group companies in resolution.
  - Financial Services Act 2012 sets out the circumstances in which public funds would be at risk (see three criteria listed in the source).
- Recommendations to moderate HMT involvement and minimize politicization:
  - Review and clarify the level of HMT involvement in firm-specific resolution decisions to moderate this involvement to focus on cases where public funds are at risk; use a consistent threshold for HMT involvement; use a clearer definition of public funds; and publicly articulate the rationale for proportionate HMT and ministerial involvement where there are no public funds risks (HMT, BOE; ¶21). Timing: MT. Priority: M.
  - Specific measures proposed:
    - (i) A clearer definition of what constitutes ‘public funds’ and how this affects deposit insurance funding decisions.
    - (ii) A consistent threshold for all HMT involvement along the lines prescribed in Article 58 of the Financial Services Act 2012.
    - (iii) A public articulation (e.g., in the SRR Code of Practice) of rationale for proportionate HMT and ministerial involvement where there are no public funds risks.
  - Consider replacing mandatory consultations of HMT by BOE in firm-specific trigger decisions with a notification requirement.

### Key recommendations (excerpted priorities and timing)
- High priority, continuous:
  - Continue pursuing staffing resources commensurate in quantity and quality with increasing demands and ambitions (all; ¶7). Timing: C. Priority: H.
  - Continue preparing for diverse failure scenarios, including fast-fail resolutions and a concurrent failure of multiple major and mid-tier firms (all; ¶43). Timing: C. Priority: H.
- Medium-term, high priority:
  - Eliminate rules that may constrain resolution funding and ensure that subsidy policies support effective resolution strategies (HMT, BOE; ¶19, ¶30). Timing: MT. Priority: H.
- Medium-term, medium priority:
  - Finalize CCP resolution plans and legislation for an expanded CCP resolution regime; expand RAF to CCPs (HMT, BOE; ¶16, ¶27). Timing: MT. Priority: M.
  - Strengthen regime for failing insurers and introduce an RRP approach for systemically significant insurers; expand RAF to insurers (HMT, PRA, BOE; ¶17, ¶27). Timing: MT. Priority: M.
  - Review and clarify HMT involvement thresholds and definitions for public funds (HMT, BOE; ¶21). Timing: MT. Priority: M.
- Short-term / near-term:
  - Build up a prefunded deposit insurance fund with an appropriate target level (HMT, FSCS; ¶33). Timing: NT. Priority: M.
  - Complete implementing IEO recommendations on BOE resolution arrangements and undertake independent evaluations of contingency planning at HMT, FCA, FSCS (all; ¶41). Timing: NT. Priority: M.
  - Continue to enhance consistency and perimeter of recovery plan reviews to ensure recovery actions do not impede firms’ resolvability (PRA; ¶24). Timing: NT. Priority: M.
- Lower priority / medium-term:
  - Expand RAF reporting and/or disclosure requirements to mid-tier banks and material foreign subsidiaries (HMT, BOE; ¶27). Timing: MT. Priority: L.
  - Adopt internal guidance to support effective independent bank branch resolutions as a fallback option (BOE; ¶13). Timing: MT. Priority: L.

_Excerpt from the EXECUTIVE SUMMARY and selected sections (practices employed on November 15, 2021). Source: 1gbrea2022007._

### EXECUTIVE SUMMARY __________________________________________________________________________________ 5

### EXECUTIVE SUMMARY

### Overall assessment
- The United Kingdom (U.K.) bank resolution and financial crisis readiness arrangements are sound but with opportunities for continued and accelerated enhancements.
- The U.K. authorities’ individual and collective crisis readiness—including with other major jurisdictions—continues to improve.
- Mid-2022, all major U.K. banks and the authorities will issue the first public statements about these banks’ resolvability.
- The SRR and RAF for banks are comprehensive, but:
  - there is space—and a need—to further enhance the SRR, including its application to central counterparties (CCPs), and to introduce one for insurance companies;
  - elements of the deposit insurance system and firm-specific resolution decision-making should be strengthened;
  - implementation and reputation risk should be addressed.

### Crisis readiness and governance
- Authorities’ initiatives:
  - The BOE has revamped its crisis readiness governance, including a Heightened Contingency Framework (HCF) Project.
  - Her Majesty's Treasury (HMT) has furthered its Professionalising Crisis Management (PCM) Project.
  - The FCA and the FSCS are undertaking similar efforts.
- The authorities test and update crisis readiness individually and collectively, including with counterparts in the U.S. and the EU—“the three jurisdictions are home to 19 of the 30 global systemically important banks (GSIBs).”
- Because the SRR has not been applied since 2011, these efforts help mitigate loss of experience in applying the SRR.
- Recommendation: Continue preparing for diverse failure scenarios, including fast-fail resolutions and concurrent failures of multiple major and mid-tier firms.

### Special Resolution Regime (SRR) and HMT role
- The SRR for banks appears robust and broadly consistent with international standards; it includes modified insolvency regimes for a host of financial firms.
- The BOE plays a key role in court-based insolvency proceedings and in providing liquidity support.
- HMT, beyond legislative and policy responsibilities, plays a critical role in certain firm-specific resolution decisions and can take firms into temporary public ownership (TPO) as a last resort.
- Concern: It is unclear how HMT’s involvement in firm-specific decisions will affect prompt and effective action, including in cross-border cases.
- Recommendation: Support operational autonomy of the BOE and the FSCS; review and clarify the level of HMT involvement in firm-specific resolution decisions to moderate involvement to cases where public funds are at risk.

### Resolvability Assessment Framework (RAF) and deadlines
- A comprehensive RAF Statement of Policy (SoP) supports authorities and firms in meeting the resolvability commitment.
- Public disclosures on major U.K. banks’ resolvability are expected in mid-2022.
- Material foreign subsidiaries and some mid-tier banks are subject to the RAF SoP, except for reporting and public disclosure requirements.
- Recommendation: Ensure the BOE undertakes resolvability assessments with a high degree of independence and heightened vigilance in scrutinizing banks’ RAF reporting reliability.

### Post-Brexit arrangements and opportunities
- The U.K.’s withdrawal from the EU fundamentally changed formal cooperation arrangements, presenting challenges and opportunities.
- Continued efforts to strengthen mutual trust and maintain or increase cooperation and coordination between U.K. and EU authorities will reduce cross-border legal and operational risks.
- Brexit offers the opportunity to address EU legacies that introduced inflexibilities weakening the U.K. resolution regime.

### COVID-19 related adjustments
- The authorities delayed some RRP requirements to alleviate operational burdens:
  - PRA cancelled major banks’ recovery plan submission for 2020.
  - BOE and PRA extended deadlines for major banks’ resolvability reporting and disclosures, compliance with valuation capabilities, and resolution pack submissions.
  - BOE set a longer transition time for mid-tier firms to meet higher MREL.
- The 2022 deadline for major U.K. firms to achieve RAF resolvability outcomes was maintained; the deadline for mid-tier banks was extended to 2023.

### CCPs and insurers
- CCPs:
  - With modifications for CCP characteristics, the SRR applies to the three recognized U.K. CCPs.
  - The regime predates international guidance issued since 2012 and the EU CCP RRP regime was not onshored prior to Brexit.
  - HMT is considering statutory changes for an expanded CCP resolution regime with more powers for the BOE.
  - Recommendation: Finalize resolution plans for CCPs and the legislation for an expanded CCP resolution regime, including a statutory requirement for regular resolution planning; expand the RAF to CCPs.
- Insurers:
  - There is a modified insolvency regime for insurers, which HMT seeks to strengthen.
  - HMT and BOE are considering an SRR for insurers; the PRA and BOE are developing an RRP approach for insurers.
  - Recommendation: Strengthen the regime for failing insurers, introduce an RRP approach for systemically significant or critical insurers, and expand the RAF to insurers.

### Deposit insurance and FSCS funding
- The FSCS currently collects levies on a pay-as-you-go basis, making it in certain cases dependent on HMT loans.
- Recommendation: Build up a prefunded FSCS with an appropriate target level and expand its financial fire power with sufficient funds under direct control and investment.

### Staffing, implementation, and reputation risk
- Staffing for recovery, resolution, and crisis management has increased but demands remain significant.
- Risk: If staffing resources prove insufficient, authorities would be exposed to implementation and reputation risk; evolving resolvability regime and intensified crisis readiness projects may force deprioritization of some BAU activities.
- Recommendation: Continue pursuing staffing resources commensurate in quantity and quality with increasing demands and ambitions.

### Key recommendations (Table 1: Recommendations on Financial Safety Net and Financial Crisis Preparedness)
- 1. Continue pursuing staffing resources that are commensurate in quantity and quality with increasing demands and ambitions (all; ¶7). Timing: C. Priority: H.
- 2. Continue preparing for diverse failure scenarios, including fast-fail resolutions and a concurrent failure of multiple major and mid-tier firms (all; ¶43). Timing: C. Priority: H.
- 3. Eliminate rules that may constrain resolution funding and ensure that subsidy policies support effective resolution strategies (HMT, BOE; ¶19, ¶30). Timing: MT. Priority: H.
- 4. Seek to further deepen cooperation and coordination arrangements with key jurisdictions (BOE, HMT; ¶36, ¶44). Timing: C. Priority: M.
- 5. Build up a prefunded deposit insurance fund with an appropriate target level (HMT, FSCS; ¶33). Timing: NT. Priority: M.
- 6. Complete implementing the IEO recommendations on the BOE resolution arrangements and undertake independent evaluations of contingency planning at HMT, FCA, FSCS (all; ¶41). Timing: NT. Priority: M.
- 7. Continue to enhance the consistency and perimeter of recovery plan reviews, and to ensure that recovery actions do not impede firms’ resolvability (PRA; ¶24). Timing: NT. Priority: M.
- 8. Expand bail-in guidance to its use in combination with other stabilization tools, and to its cross-border application (BOE; ¶30). Timing: NT. Priority: M.
- 9. Finalize guidance on the recognition of foreign resolution actions (BOE, HMT; ¶40). Timing: NT. Priority: M.
- 10. End the discriminatory treatment of overseas branch depositors in the creditor hierarchy (HMT; Appendix, item #8). Timing: NT. Priority: M.
- 11. Finalize the resolution plans for CCPs and the legislation for an expanded CCP resolution regime, including a statutory requirement for regular resolution planning; expand the RAF to CCPs (HMT, BOE; ¶16, ¶27). Timing: MT. Priority: M.
- 12. Strengthen the regime for failing insurers, including their insolvency regime, and introducing an RRP approach for insurers that could be systemically significant or critical if they fail and an SRR that ensures effective group-level resolutions; expand the RAF to insurers (HMT, PRA, BOE; ¶17, ¶27). Timing: MT. Priority: M.
- 13. Review and clarify the level of HMT involvement in firm-specific resolution decisions to moderate this involvement to focus on cases where public funds are at risk; use a consistent threshold for HMT involvement; use a clearer definition of public funds; and publicly articulate the rationale for proportionate HMT and ministerial involvement where there are no public funds risks (HMT, BOE; ¶21). Timing: MT. Priority: M.
- 14. Expand RAF reporting and/or disclosure requirements to mid-tier banks and material foreign subsidiaries (HMT, BOE; ¶27). Timing: MT. Priority: L.
- 15. Adopt internal guidance to support effective independent bank branch resolutions as a fallback option (BOE; ¶13). Timing: MT. Priority: L.

*Timing codes: C: continuous; I: immediate (<1 year); NT: short term (1–2 years); MT: medium term (3–5 years).*

_Excerpt from the EXECUTIVE SUMMARY (practices employed on November 15, 2021)._

### 7.      The authorities’ staffing for resolution and crisis management has increased but

### 7.      The authorities’ staffing for resolution and crisis management has increased but continues to be stretched

### Staffing for resolution and crisis management
- At end-2020, BOE’s Resolution Directorate (RD) had 87 full-time equivalent (FTE) staff and HMT’s Financial Stability Group (FSG) had 74 FTE staff, growing in the past five years from 50 and 38 FTE, respectively.
- The FCA’s Resolution Execution Department has 30 FTE staff mitigating the failure of solo-regulated firms and working with FCA supervisors and other authorities for dual-regulated firms.
- RD comprises five units: Policy; Domestic Resolvability; International Resolvability; Heightened Contingency Framework; and Resolvability Assessment Framework. A team from the BOE’s Legal Directorate supports RD; RD can also draw resources across BOE and PRA.
- FSG comprises four teams: (i) Banking Assets & Resolution Strategy; (ii) Resilience and Resolution; (iii) Structural Policy and Strategy; and (iv) Systems, Stability and Analysis.
- Close to half of FSG staff works on resolution matters full time; HMT’s reservist program ensures that FSG staff and alumni are regularly trained and are capable of being drafted in at short notice.
- FSG works closely with other HMT experts, including in the Financial Services Group with about 150 FTE staff.
- HMT’s resourcing model allows for extra resources to be drawn into FSG, or scaled down, to meet the department’s needs.
- As resolvability regimes evolve, crisis readiness projects intensify and international engagements expand; staff may need to deprioritize some BAU activities. When COVID-19 measures wind down, nonperforming assets may rise, putting pressures on firms.
- The FSAP welcomes initiatives to solidify temporary staff allocated in recent years and to recruit staff with skills matching the evolving maturity of the resolution regime.
- Recommendation: Authorities should continue to ensure that staffing for resolution and crisis management is commensurate in quantity and quality with increasing demands due to market developments and policy ambitions.

### Developments since the 2016 FSAP
- 2016 FSAP recommendations focused on bank resolution (e.g., liquidity support, U.K. branches), cross-border cooperation (e.g., overseas branch depositors, engagement with smaller jurisdictions), deposit insurance (e.g., lack of a prefunded deposit insurance fund [DIF]), and crisis management (e.g., the role of the FCA/FSCS, the resolution fund).
- Of the 14 recommendations, the U.K. authorities implemented 8; 2 were partially implemented; 2 will be implemented in the near term.
- The U.K. bank resolution regime underwent an almost wholesale update in the last five years, including legislation updates to implement changing EU rules.
- New policies, guidance, and facilities were introduced, e.g., approach to assessing resolvability, approach to setting MREL, approach to providing liquidity in resolution, and guidance on executing bail-in.
- The authorities engage with industry and the public through discussion and consultation papers and a joint Regulatory Initiatives Grid.
- Ongoing legislative and policy work at the time of writing included CCP resolution, insolvency arrangements for insurers, and MREL.

### Brexit and cross-border cooperation
- After a referendum in June 2016, the United Kingdom left the European Union on January 31, 2020, with a transition period ending on December 31, 2020.
- Brexit fundamentally changed formal cooperation arrangements; U.K. authorities are no longer members of the EU’s ‘resolution colleges,’ and automatic recognition of respective resolution decisions does not apply.
- Ultimate decision-making on cross-border resolutions requires decisions at the political level in both jurisdictions.
- The U.K. authorities continue to engage with international counterparts to support and promote cross-border cooperation and coordination of resolution, and to reduce legal and operational risks (e.g., Trilateral Principal Level Exercise (TPLE)).
- Brexit also offers opportunities to address EU legacies that have imported inflexibilities that may weaken the U.K. resolution regime.

### COVID-19 experience and operational adjustments
- The COVID-19 outbreak did not cause a financial crisis, but the Authorities’ Response Framework (ARF) was activated to coordinate the response.
- PRA cancelled major U.K. banks’ recovery plan submission for 2020; BOE and PRA extended deadlines for major banks’ resolvability reporting and disclosures, compliance with valuation capabilities, and resolution pack submissions; BOE set a longer transition time for mid-tier firms to meet higher MRELs.
- The January 1, 2022 deadline for major firms to achieve the RAF resolvability outcomes was not changed.

### A. (Investment) Banks and Building Societies — key features of the SRR
- The SRR comprises stabilization powers and modified insolvency procedures; stabilization powers include BOE’s bail-in and transfer powers.
- Firms’ business or shares can be transferred to: a private sector purchaser (PSP); a temporary bridge bank controlled and operated by the BOE; an asset management company (AMC) owned by HMT or the BOE and controlled by the BOE; or, as a last resort, to a company owned by HMT.
- Statutory safeguards include independent valuations and the NCWO (no creditor or shareholder worse off than in insolvency) safeguard.
- Modified court-based insolvency and special administration procedures for banks, building societies, and investment banks are part of the resolution regime.
- Only BOE, the PRA (or FCA), or the Secretary of State for Business, Energy and Industrial Strategy can apply under these modified procedures; they would nominate the Liquidator and a Liquidation Committee’s members; the FSCS would sit on a Creditor Committee.
- When BOE decides to use transfer powers and deems the residual firm unable to pay its debts, it would nominate and engage closely with the Administrator to ensure continuity of services.
- SRR applies, in certain circumstances, to foreign bank branches in the United Kingdom, including several systemic branches with balance sheets more than £15bn-25bn.
- Pre-resolution powers to remove impediments to SRR’s stabilization powers are excluded from the branch resolution regime.
- There is merit in adopting internal guidance to support effective independent branch resolutions as a fallback option.
- Public interest test (PIT):
  - BOE undertakes the PIT when the prudential supervisor (PRA or FCA) has decided the firm is failing or likely to fail (Condition 1), and BOE has concluded it is not reasonably likely that action will be taken that will result in Condition 1 ceasing to be met.
  - For the PIT, BOE determines whether using stabilization tools would advance the statutory special resolution objectives (SROs): ensure continuity of banking services and critical functions; protect financial stability, public confidence, funds, covered depositors, covered investors, and client assets; and avoid undue interference with property rights.
  - For larger firms, stabilization powers are anticipated to be the primary course of action.
  - Modified insolvency procedures—including transfer of deposits—would be primarily used for the smallest firms with less than 40,000–80,000 transactional accounts.
  - BOE considers bail-in the preferred strategy for the largest and most complex firms with a total balance sheet above £25 billion and most likely with balance sheets greater than around £15 billion; for other firms, partial transfer is considered more appropriate.
- SRR applies to the seven commercial banknote issuers in Scotland and Northern Ireland; single point of entry bail-in is the preferred resolution strategy for groups that these firms are part of.

### B. CCPs
- SRR applies, with modifications for CCP characteristics, to the three recognized CCPs (LCH, LME Clear, ICE Clear Europe).
- U.K. introduced a CCP resolution regime in 2012; international guidance has since been introduced.
- In May 2021, HMT concluded a public consultation to expand the regime; statutory changes were being considered.
- Proposed changes under consideration would:
  - Give BOE additional powers including removing impediments to resolvability, triggering resolution before CCP recovery measures exhausted, restricting remuneration of equity, suspending early termination rights, taking control of a CCP, appointing temporary managers, reducing variation margin payments, and returning a CCP to a matched book.
  - Require CCPs to hold a greater amount of loss-absorbing capital (second tranche of ‘skin in the game’), give BOE write-down and cash-call powers, and introduce an NCWO safeguard.
- FSAP welcomes these improvements.
- Recommendation: BOE should finalize CCPs’ resolution plans and be subject to a statutory requirement for regular (e.g., annual) resolution planning, including resolvability assessments, for CCPs.

### C. Insurance Firms
- Authorities intend to introduce an SRR for insurance companies; currently the PRA’s preferred approach for an insurer’s failure is a solvent run–off (firm retains permissions for existing contracts but cannot write new business); a portfolio transfer is also possible.
- PRA, FCA, creditors, shareholders, and directors can apply to the courts for a modified insolvency procedure.
- Mid-August 2021, HMT concluded a consultation to amend the insolvency procedure.
- Proposed changes would enhance courts’ write-down powers, introduce a court-appointed ‘write-down manager,’ introduce a moratorium for certain contractual termination rights, a stay—for life insurance only—on policy holder surrender rights in certain circumstances, and policy holder protections against write-downs.
- HMT acknowledges U.K. arrangements are not fully aligned with international guidance: there is no SRR for insurers, including a designated administrative resolution authority; HMT and BOE intend to propose such an SRR.
- PRA, together with BOE, is developing an RRP approach for insurance companies, complementing firms’ duty under PRA’s Fundamental Rule 8 to prepare for orderly resolution.
- FSAP stresses the importance of effective resolution at the group level.

### D. Payment and Electronic Money Institutions (PI/EMI)
- In 2021, the U.K. government introduced a bespoke administration regime for PIs/EMIs, based on the special administration regime for investment banks.
- The regime was introduced because prior insolvency processes had been suboptimal for consumers: recent administration cases had taken years to resolve, leaving customers without access to money for prolonged periods and receiving reduced monies after distribution costs.
- Key feature: explicit mandate for the special administrator to return customer funds sooner, including a mechanism to facilitate transfer of customer funds to a PSP.
- Recommendation: Depending on pace of change and size of PIs/EMIs, there could be merit in developing a policy to determine when an RRP approach for PIs/EMIs may be needed.

### E. Post-Brexit future improvements and EU legacies
- Certain EU legacies in the U.K. resolution regime may constrain the use of public funds for resolution measures. The authorities should eliminate the following from the U.K. rulebook:
  - The mandatory minimum eight percent bail-in requirement before accessing resolution financing arrangements or using the TPO tool; and the five percent cap on support from the resolution fund. These have been laid down in the SRR Code of Practice and not in primary legislation.
    - FSAP favors flexibility and does not support mandatory minimum bail-in requirements for accessing public or industry-funded financial sources or caps thereupon.
    - Alternatively, the U.K. authorities should introduce a financial stability exemption, like the one the IMF advised for the euro area.
  - State aid rules together with a broad definition of ‘public funds.’ In the EU, mandatory industry-funded DIFs and resolution funds are considered ‘public funds’ and are subject to state aid rules; the United Kingdom also considers levies collected from the industry as public funds.
    - The U.K. authorities should ensure that state aid or subsidy control considerations do not prevent action being taken to maintain financial stability.
    - The prudential carveout under the U.K.-EU Trade and Cooperation Agreement, reflected in the proposed financial stability direction power in the Subsidy Control Bill, should provide the U.K. authorities with relevant powers to achieve this.

*UNITED KINGDOM — INTERNATIONAL MONETARY FUND*

### 20.      HMT holds the purse strings and sway in firm-specific resolution decisions:

### 20.      HMT holds the purse strings and sway in firm-specific resolution decisions:

### De facto decision-making power
- Resolution funding may be sourced from a bank levy that the largest firms pay to HMT.
- The bank levy is a U.K. tax, and its revenues go into the Consolidated Fund; any use thereof, either up to the amount raised with the bank levy or more than that, requires HMT decision for which Ministers are accountable to parliament and the public.
- The FSCS depends on government loans for bank insolvencies when it cannot meet costs with levies, recoveries, or via its commercial borrowing facility, which is the case if any of the largest non-SIBs were to fail.

### De jure decision-making power
- When public funds would be at risk, irrespective of the amounts involved, HMT has directive powers and can commission BOE to assess mitigating measures, including alternative resolution options to reduce the cost for the government.
- HMT consent or approval is required in a host of resolution decisions, including:
  - the use of any resolution tool if this would be even just “likely” to implicate public funds;
  - transfer to a PSP, bridge bank, or AMC, of a firm that received prior financial assistance from the government;
  - BOE ELA and use of the RLF (either with or without a government indemnity);
  - the use of any resolution tool for the resolution of a U.K. branch of a foreign bank;
  - the recognition of foreign resolution decisions;
  - to impose special continuity obligations on group companies in resolution, in which case “Ministers will assess the broad public interest of the particular situation.”
- The circumstances in which public funds would be at risk are as follows (Financial Services Act 2012): (i) HMT might reasonably be expected to find it appropriate to provide financial assistance; (ii) HMT or the BOE might reasonably be expected to regard it as appropriate to exercise any of their respective SRR powers, and HMT might reasonably be expected to find it appropriate to incur expenditure in connection with the exercise of those powers; or (iii) the FSCS might reasonably be expected to request financial assistance from HMT, including via the National Loans Fund (NLF).

### Key assessment and recommendation to moderate HMT involvement
- The level of HMT’s involvement in firm-specific resolution decisions should be reviewed and clarified to moderate this involvement to cases where public funds are at risk.
- The FSAP supports interagency cooperation and recognizes that HMT support is needed for the use of public funds in resolutions, particularly:
  - the use of government stabilization tools or an HMT-owned AMC; and
  - provision of exceptional financial support.
- Concern: BOE is responsible for resolution actions, yet HMT plays a critical role in approving or consenting to certain operational firm-specific resolution decisions even when public funds are not entailed, which may politicize firm-specific resolution decisions—including in cross-border contexts.

### Specific measures to minimize politicization and clarify thresholds
- Three lines to minimize perception of politicization and support operational autonomy of BOE and FSCS:
  - (i) A clearer definition of what constitutes ‘public funds’ and how this affects decisions on funding of deposit insurance, including a prefunded DIF as discussed elsewhere.
  - (ii) A consistent threshold for all HMT involvement along the lines prescribed in Article 58 of the Financial Services Act 2012, i.e., where there is a material risk of circumstances arising in which public funds would be put at risk as detailed in footnote 23.
  - (iii) A public (e.g., in the SRR Code of Practice) articulation of and rationale for proportionate HMT and ministerial involvement where there are no public funds risks, such as the government’s broader responsibility for the United Kingdom’s compliance with its international obligations (including economic and financial sanctions).
- Authorities should reconsider instances of mandatory consultations of HMT by the BOE, particularly in firm-specific decisions as to whether the conditions to trigger resolution are met; such mandatory consultations could be replaced with a notification requirement (as is the case for the circumstances described in Article 58 of the Financial Services Act 2012).
- Note: Currently, the statutory threshold for HMT involvement in firm-specific resolution decisions ranges from no fiscal consideration, to “likely” or “material” risks to public funds.

### Operational autonomy and technical decision-making
- It is unclear what additional information HMT would be able to offer to assist in technical and firm-specific decisions (e.g., timing and other circumstances relevant to whether a bank is “failing or likely to fail”), which should be left to autonomous regulators with detailed information and deep understanding of the firms under their responsibility.
- Ensuring BOE operational independence in resolvability assessments is important; BOE should scrutinize firms’ RAF reporting to ensure the reliability of the reporting.

*Source: 1gbrea2022007 - 20.      HMT holds the purse strings and sway in firm-specific resolution decisions*

### 31.      Through a bank levy, large U.K. financial firms provide a funding source for resolution

### 31.      Through a bank levy, large U.K. financial firms provide a funding source for resolution

### Bank levy: purpose, scope, and use for resolution funding
- Introduced in 2011 because, as noted in the June 2010 Budget, “banks should make a fair contribution in respect of the potential risks they pose to the U.K. financial  system and wider economy.”
- Payable by (groups of) banks and building societies with total equity and liabilities exceeding £20 billion.
- As of the 2020/21 financial year, since its introduction, the U.K. government collected £25.5 billion through the bank levy.
- Per the SRR Code of Practice (section 11.8), the bank levy is partly used toward ex ante funding for resolution with a target level for 2024 of one percent of covered deposits.
- The government can make amounts up to and, if necessary, more than this level available at BOE’s request.

### Cross-holdings and incentives
- Cross-holdings of MREL instruments between firms subject to MREL requirements, which could hamper effective bail-in strategies, are disincentivized by the U.K. capital requirement rules.

### Deposit insurance (FSCS): funding sources, limits, and recommended reforms
- FSCS funding sources for depositor payouts or transfers:
  - (i) annual and interim industry levies based on previous and anticipated costs for deposit-taker failures;
  - (ii) a revolving commercial credit facility, which is available within days for short-term needs;
  - (iii) borrowing from—and at the sole discretion of—HMT, including via the NLF, if the PRA determines that the FSCS is unable to raise sufficient extraordinary levies and has exhausted all other funding sources.
- Protocol between HMT and the FSCS documents operational modalities for government assistance; supported by a draft loan agreement.
- Any FSCS borrowing from either the private sector or from the government is repaid through ex post levies on firms in the deposit levy class and recoveries in insolvency proceedings.
- The FSCS collects levies on a pay-as-you-go basis—currently capped for the deposit levy class by the PRA at £1.5 billion a year—and it has a small commercial borrowing facility; either would be insufficient if any of the largest 15 non-SIBs would fail, requiring HMT/NLF support.
- Risks of ex post levies: collecting extraordinary or ex post levies could exacerbate financial system risks and failing banks might escape paying the levies.
- Recommendation: build up a prefunded deposit insurance fund for FSCS with an appropriate target level—e.g., payouts for the concurrent failure of the largest 2–4 non-SIBs without a resolution strategy using the stabilization powers—and levy assessments enabling the FSCS to reach the target level within a reasonable time.
- Recommendation: an expedited timeline could be possible with start-up funding, using, for example, the resources raised from the industry with the bank levy.

### Liquidity in resolution: RLF, SMF, ELA, and indemnity considerations
- Since 2017, a flexible RLF complements BOE’s Sterling Monetary Framework (SMF) and ELA arrangements.
- RLF applies to firms when these are in a BOE-led resolution—but not to firms that are subject to insolvency or administration.
- Liquidity expectations:
  - First need to come from firms as per the RAF expectations on funding capabilities.
  - The SMF remains available to firms that meet the qualification requirements.
  - ELA can be extended to firms before or after resolution and pre-resolution ELA could be rolled into the RLF.
- RLF scope and collateral:
  - Applies to a wide range of participants, including foreign branches and subsidiaries in case of a BOE-led resolution.
  - May be secured against a wide range of collateral.
- Funding indemnity: The BOE would highly likely request an indemnity from HMT for RLF lending; under the 2018 MOU on the ‘Financial Relationship Between HM Treasury and the Bank of England,’ HMT would assess this request on a case-by-case basis.
- BOE could provide more detail on the RLF when it updates its Approach to Resolution after the first round of RAF assessments.

### International cooperation and contribution to global public goods
- U.K. authorities actively help develop international standards and good practices on resolution and crisis management.
- They contribute to the FSB Resolution Steering Group and its cross-border crisis management subgroups for banks, insurers, and financial market infrastructures.
- The BOE leads the FSB review of the practices in CMGs and to identify options for further cooperation through CMGs.
- The BOE’s Centre for Central Banking Studies provides a platform for sharing U.K. expertise on recovery and resolution planning with international financial authorities.
- Trilateral coordination:
  - The U.K., U.S., and EU are home to 19 of the 30 GSIBs.
  - Since 2016, the Trilateral Principal Level Exercise (TPLE) regularly convenes principals, senior executives, and staff responsible for GSIB resolution in the U.K., U.S., and EU.
- Post-Brexit technical arrangements: U.K. authorities concluded technical arrangements with EU authorities for post-Brexit cooperation on bank recovery and resolution planning, resolution implementation, and crisis management.
- BOE bilateral and multilateral cooperation:
  - BOE chairs CMGs for three GSIBs (Barclays, Standard Chartered, HSBC) and for two CCPs (Ice Clear Europe, LCH).
  - PRA chairs CMGs for internationally active insurers (Aviva, Legal & General Group, British United Provident Association Limited, RSA Insurance Group).
  - BOE and PRA are members of CMGs for 18 GSIBs; BOE is a member in the CMGs for eight CCPs and an observer in the resolution colleges for six EU banks.
  - U.K. authorities participate in a regional GSIB CMG organized by the Hong Kong authorities.
- Progress in CMGs is shared with the FSB through its annual resolvability assessment process.

### Recognizing and supporting foreign resolution actions
- The United Kingdom has a statutory regime for recognizing foreign resolution actions: Banking Act 2009 (Part 1, Chapter 6) authorizes the BOE—with HMT approval—to recognize or refuse, wholly or partially, a foreign resolution action.
- Recognition may be granted if the foreign action’s objectives and anticipated results are broadly comparable to those under the U.K. SRR.
- Recognition can be refused when certain conditions are met, including:
  - an adverse effect on U.K. financial stability,
  - material fiscal implications for the United Kingdom, or
  - discrimination against creditors located or payable in the United Kingdom.
- Recognition decisions must be made public.
- First application of regime:
  - In May 2021, the BOE, with HMT approval, recognized the bail-in decisions for notes (loans) issued by a U.K. special purpose vehicle governed by English law, related to PrivatBank’s 2016 bail-in by the National Bank of Ukraine.
  - During the decision process, BOE kept relevant stakeholders, including the National Bank of Ukraine and creditors’ representatives, informed about the recognition process throughout.
- BOE intends to publish guidance on the U.K. recognition regime covering:
  - pre-resolution cross-border coordination at a high level;
  - the U.K. decision-making process within and between the BOE and HMT;
  - legislative grounds on which recognition is partially or fully granted or refused.
- Lessons from the PrivatBank recognition are informing crisis readiness projects (play and runbooks, communication planning).
- The guidance is an opportunity to clarify interaction between recognition of foreign resolution actions and recognition of foreign insolvency proceedings concerning banks.

### Financial crisis preparedness: contingency planning, testing, and agency arrangements
- BOE progress: implementing recommendations from its Independent Evaluation Office (IEO) evaluation of BOE resolution arrangements (June 2018), with IEO planning to report in 2022 to the Court of Directors on implementation.
- Recommendation: a similar independent evaluation should be undertaken for the crisis readiness of HMT, the FCA, and the FSCS to complement internal audit and parliamentary scrutiny.
- Authorities’ four-pronged approach to maintain contingency planning and crisis management expertise:
  - Team Rotation: staff rotate into contingency planning teams; teams can draw on internal and external reservists lists for surge staffing or specialist expertise.
  - Training Programs: ongoing training and induction procedures cover a wide range of crisis management topics; mutual training programs exist for HMT-BOE and HMT-FCA staff; BOE RD runs a Masterclass with senior-level presenters.
  - Testing and Exercising: active testing and exercising schedule internally, domestically, and internationally; regular testing preferred to one-off testing; internal and domestic testing and exercises are well-embedded and run regularly.
  - Documenting Operations: playbooks, runbooks, and manuals support senior officials and working-level staff; documentation is continuously informed by lessons learned from testing, exercising, and contingency planning.
- Value of contingency planning:
  - Helps improve mutual understanding between authorities, assess geo-political risks, set up bridge banks, and highlights importance of agility in resourcing and decision-making.
  - Authorities should continue to prepare for fast-fail resolutions and concurrent failures of multiple major and mid-tier firms.
- TPLE and exercises:
  - TPLE is a key platform for cross-border cooperation for GSIB resolution.
  - The 2020 crisis simulation exercise (CSE) covered several months of a ‘real-life’ crisis and informed enhancements to crisis preparedness.
  - Recommendation: develop similar approaches with other key jurisdictions, e.g., starting with key authorities in Asia.

### Organization for financial crisis management: governance, projects, and interagency mechanisms
- Legal and governance baseline:
  - Financial Services Act 2012 requires an MOU between the BOE and HMT on crisis management, which now also recognizes the FCA and the FSCS without making them signatories.
  - Relevant statutory provisions and the MOU assign clear responsibilities to each authority.
- HMT’s PCM Project:
  - Overseen by the Director of Financial Stability.
  - Aims to reform HMT’s approach to financial crisis management and ensure HMT readiness to respond to future financial stability events.
  - Developed manuals and resources, and uses regular training and exercising to maintain familiarity and resilience.
  - Deliver crisis readiness for CCPs and insurers as well.
- BOE’s HCF and Heightened Contingency Planning Escalation Framework:
  - HCF Project focuses on resolution; owned and delivered by the Resolution Directorate.
  - Clarifies, for each resolution strategy, the division of labor within the BOE and includes a preparedness monitoring tool.
  - Escalation Framework supports senior leadership by indicating escalation status, providing an indicative assessment of resolution actions at different stages, and facilitating decision-making with a top-down view of risks and mitigating factors.
- Interagency engagement organized around the ARF and the Cross-Authority Resolution Group (CARG):
  - Authorities’ Response Framework (ARF):
    - Mechanism for U.K. authorities to coordinate collective responses to operational incidents or threats impacting the financial sector.
    - Regularly trained, tested, and reviewed jointly between the BOE, HMT, and the FCA; other governance entities may be involved.
    - ARF was fully activated at all levels to coordinate responses to the COVID-19 outbreak.
  - Cross-Authority Resolution Group (CARG):
    - Includes the five financial safety net members and the Debt Management Office.
    - Supports regular working-level engagement on BAU resolution planning and financial crisis management.
    - Produced shared materials on how authorities would respond and deliver certain resolution strategies.
    - CARG work paused due to COVID-19, restarted in late 2021 focusing on execution plans for major banks and cross-agency runbooks for bank insolvency, bridge banks, and bail-in.

*Source: 1gbrea2022007 - 31.      Through a bank levy, large U.K. financial firms provide a funding source for resolution*

### Appendix I. Status Update 2016 FSAP Recommendations

### Appendix I. Status Update 2016 FSAP Recommendations

### Overview
- Source: the 2016 technical note (Table 1) and the Financial System Stability Assessment report.
- 2021 Implementation Status: Of the 14 recommendations, 8 were implemented, 2 were partially implemented, 2 will be implemented in the near term.

### Implementation summary (by recommendation)
- 1. Work with international partners to develop an effective resolution regime for insurance firms that could be systemically significant at the point of failure (HMT, BOE, PRA)
  - Status: Not Yet Implemented.
  - Key points:
    - No special resolution regime was introduced for the U.K. insurance sector.
    - Mid-2021, HMT undertook a public consultation on amending the insolvency regime for insurers; HMT and the BOE also intend to propose an SRR for insurers.
    - The PRA, together with the BOE, is developing an RRP approach for insurance companies, complementing firms’ duty under the PRA’s Fundamental Rule 8.
    - BOE involvement in international guidance:
      - EIOPA Opinion on the Harmonisation of Recovery and Resolution Frameworks for (Re) Insurers (2017)
      - FSB KA Assessment Methodology for the Insurance Sector (2020)
      - IAIS guidance for recovery planning (2019), and for resolution powers and planning (2020)

- 2. Provide the BOE with an explicit general power in the Banking Act 2009 to depart from pari-passu treatment in resolution, where justified by financial stability interest (HMT, BOE)
  - Status: Not Yet Implemented.
  - Key points:
    - An explicit general power was not introduced in the Banking Act 2009 to depart from the pari passu principle in resolution.
    - Section 12AA (4) of the Banking Act 2009 requires that the bail-in power be used consistent with this principle; Section 48B offers an exemption under certain circumstances (including, for example, widespread contagion risk).
    - U.K. authorities state an implicit exemption is available for other resolution powers because no pari passu requirement exists for other resolution powers like the one in Section 12AA (4).
    - U.K. authorities will consider updating the SRR Code of Practice to reflect this.

- 3. Include the FCA and the FSCS in the Crisis Management MoU, as well as in the periodic high-level BOE/HMT discussions on contingency planning (HMT, BOE, Financial Conduct Authority (FCA), FSCS)
  - Status: Partially Implemented.
  - Key points:
    - The FCA and the FSCS are not signatories to this MOU—or any similar MOU on firm failures including all members of the U.K. financial safety net.
    - Section 47 of this MOU references the FCA and the FSCS, noting they may need to be involved in monitoring and assessment of risks, or planning and implementation of financial sector interventions.
    - The MOU is complemented with other bilateral crisis management and resolution MOUs.
    - When needed, the FCA and the FSCS are included in discussions on contingency planning.

- 4. Recalibrate the supervisory approach to increase the monitoring of medium-sized banks in the run-up to the full implementation of MREL (PRA)
  - Status: Implemented.
  - Key points:
    - Intensity of supervision on non-systemic firms has intensified.
    - Before the COVID-19 outbreak, the PRA undertook several thematic reviews (including for fast growing firms) and stress testing to identify the most vulnerable firms.
    - In response to the COVID shock, the PRA set up a monitoring approach and developed escalation triggers.
    - Firms on the PRA watchlist and the heightened monitoring list have been prioritized for recovery and resolution planning.
    - Medium-size firms with a bail-in or partial transfer resolution strategy are required to meet the RAF expectations.

- 5. Revise proposed amendments to the BA to clarify the relationship between the Temporary Manager and shareholders of a firm, in line with company law (HMT, PRA)
  - Status: Implemented.
  - Key points:
    - Clarified in the Financial Services and Markets Act, Section 71C et seq.

- 6. Finalize and adopt the amendments to the contractual bail-in requirement (HMT, BOE)
  - Status: Implemented.
  - Key points:
    - Supported by the Banking Act 2009, Section 3A(4)–(5); the PRA Rulebook, chapter on ‘Contractual Recognition of Bail-In;’ FCA Handbook, chapter on ‘Contractual recognition of bail-in.’

- 7. Finalize and adopt the amendments to the BA to empower BOE to independently resolve U.K. branches of non-EEA firms where appropriate (HMT, BOE)
  - Status: Implemented.
  - Key points:
    - Legislated in the Banking Act 2009, Section 89JA (‘Resolution of U.K. branches of third-country institutions’).
    - With the U.K. withdrawal from the EU, this section now also applies to firms from the European Economic Area.

- 8. Eliminate less favorable treatment provided to deposits held with third-country branches of U.K. banks, to the extent legally feasible, given provisions of the BRRD (HMT, BOE)
  - Status: Not Implemented.
  - Key points:
    - The U.K. creditor hierarchy for insolvency and stabilization options continues to treat deposits held through third-country branches of U.K. banks less favorably compared to deposits held in the United Kingdom (see Schedule 6 of the Insolvency Act 1986).
    - This is inconsistent with KA7.4, which prescribes that national laws and regulations should not discriminate against creditors based on the location of their claim or the jurisdiction where it is payable.

- 9. Establish an approach for engaging with non-CMG hosts where U.K. banks and CCPs have a systemic presence, in line with FSB guidance (BOE)
  - Status: Partially Implemented.
  - Key points:
    - No regular (e.g., annual) process in place to identify—and engage with—non-CMG host jurisdictions where U.K. GSIBs have a systemic presence.
    - U.K. authorities engage with host authorities that are not members of global CMGs through:
      - a regional CMG in Asia for one U.K. GSIB,
      - regional and non-core supervisory colleges,
      - SRB-led resolution colleges for major EU banks.
    - BOE monitors U.K. GSIBs’ global operations to determine whether CMGs’ composition should be adjusted; a change occurred in Asia for one GSIB.
    - For systemic CCPs, the CPMI-IOSCO ‘SI>1’ process helps identify host jurisdictions where the two U.K. global systemically important CCPs have a systemic presence.
    - Over three-quarters of these jurisdictions are members of the CCPs’ CMGs; all jurisdictions are represented at the FSB fmiCBCM.

- 10. Build on current arrangements to develop operational principles for funding of firms in resolution (HMT, BOE, FSCS)
  - Status: Implemented.
  - Key points:
    - In 2017, U.K. authorities set up a flexible Resolution Liquidity Framework for banks, building societies, and investment firms.
    - The RLF offers liquidity support to these entities or their holding company in a BOE-led resolution.
    - The RLF complements the existing Sterling Monetary Framework facilities and Emergency Liquidity Assistance, which remain available to firms before and after resolution, provided the firms qualify and meet the pertinent requirements.

- 11. Update the crisis management MoU to reflect the common understanding on the use of the resolution fund (HMT, BOE, FSCS)
  - Status: Implemented.
  - Key points:
    - HMT has sole responsibility for decisions on whether and how to use public funds in resolution.
    - The MOU details the interactions between BOE and HMT on the use of public funds.

- 12. Clarify the circumstances in which an indemnity would be needed to deliver ELA (HMT, BOE)
  - Status: Implemented.
  - Key points:
    - Section 9 of the Crisis Management MOU between HMT and BOE notes that “The Treasury would consider any request by the Bank for an indemnity on a case-by-case basis.”
    - Section 9 of the MOU on the ‘Financial Relationship Between HM Treasury and the Bank of England’ sets out the mutual understanding on the types of operation that would be backed by BOE’s own capital, and those for which BOE may request an indemnity from the Treasury.
    - Further details on the operation of the capital principles will be agreed separately between the BOE and HMT.

- 13. Introduce risk-based contributions (PRA, FSCS) and update the lending protocol between HMT and the FSCS to reflect the new target level (HMT, FSCS)
  - Status: Implemented.
  - Key points:
    - For deposits, risk-based levies were introduced.
    - The lending protocol was updated.

- 14. Re-examine the appropriateness of an ex-ante deposit insurance fund with a target level adequate for the U.K. banking system (HMT)
  - Status: Not Implemented.
  - Key points:
    - The U.K. authorities do not intend to put in place a fully prefunded deposit insurance fund that is managed by the FSCS.

*Source: Appendix I. Status Update 2016 FSAP Recommendations (1gbrea2022007) — 2021 implementation summary.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1gbrea2022007.pdf_