Today the Bank of England has published its second assessment for each of the eight major UK banks under the Resolvability Assessment Framework (RAF). This is our approach to assessing whether these firms are prepared for resolution. Our assessment gives 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 – not public funds – first in line to bear the costs of failure.
The assessment finds major UK banks have continued to make progress in improving their preparations for resolution, including embedding resolution preparations into their everyday business, and in addressing issues outstanding from the first assessment in 2022.
The Bank used the second RAF assessment to assess major UK banks’ progress against issues outstanding from the first assessment, and for the first time to test how their preparations for resolution work in practice. The assessment focussed on one of the three outcomes major UK banks need to achieve to be considered resolvable: having Adequate Financial Resources in the context of resolution.
As a natural consequence of the more detailed assessment conducted by the Bank, and the work done by firms themselves to test their capabilities, this second RAF assessment has identified new issues, but none of these issues are likely to impede the Bank’s ability to execute a resolution. Further improvements in the areas identified in this assessment will help smooth the execution of a resolution.
Banks are expected, as a priority, to address the feedback from this and the previous RAF assessment, and continuously maintain and improve their resolvability capabilities.
We will use future RAF assessments to undertake further detailed analysis of the major UK banks. The next RAF 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.
In light of the progress made to date on resolvability and to give the Bank and major UK banks time to further enhance and progress testing of their resolution capabilities ahead of the next assessment, the PRA will consult on the necessary rule changes to postpone the third RAF assessment by one year to 2026-27 rather than 2025-26. The Bank 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.
Dave Ramsden, Deputy Governor for Markets, Banking, Payments and Resolution, said:
“We welcome the progress made by the major UK banks. Maintaining a credible and effective resolution regime is a continuous process, and authorities and firms need to respond as the financial system and regulatory landscape evolves. Resolvability will never be ‘done’ and there will always be lessons to learn from putting the regime into practice.”
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