Overview of the Act
The purpose of the Bank Resolution (Recapitalisation) Act 2025 is to enhance the UK’s resolution regime for managing the failure of financial institutions. Specifically, it:
Expands the statutory functions of the Financial Services Compensation Scheme (FSCS), requiring it to provide funds to the Bank of England upon request which could be used to meet certain costs arising from the use of the resolution regime to manage the failure of a bank, building society or Prudential Regulation Authority (PRA) authorised investment firm.
Allows, through PRA rules, for the FSCS to use its levy-raising powers to recover any funds provided to the Bank of England after a failure event through imposing levies on the banking sector.
Extends the Bank of England’s ability, through explicit provision, to require the issuance of shares in connection with a resolution, to facilitate the Bank’s use of the funds provided by the FSCS to meet a failing bank’s recapitalisation costs.
Makes a number of minor and consequential amendments to legislation to support the measures outlined above and ensure FSCS funds can be used effectively in a resolution. It also introduces specific reporting and notification requirements related to use of the new mechanism.