New Bank of England rules to end "too big to fail"

Following a public consultation, the Bank of England is publishing its policy on setting the Minimum Requirement for own funds and Eligible Liabilities (MREL), which is a requirement under the EU Bank Recovery and Resolution Directive.

These requirements will make it possible to resolve failing banks by ensuring that banks hold sufficient equity and debt that can absorb losses. It will enable the recapitalisation of businesses that need to keep operating during the process because they provide important financial services to households and businesses.

The Bank says the rules represent "one of the last pillars of post-crisis reforms" designed to make banks safer and more resilient, and to avoid taxpayer bailouts in future.

The new rules will be introduced in two phases. Banks will be obliged to comply with interim requirements by 2020. From 1 January 2022, the largest UK banks will hold sufficient resources to allow the Bank of England to resolve them "in an orderly way".

Mark Carney, Governor of the Bank of England, said: “This policy is a significant milestone on the journey to end Too Big To Fail in the UK. The implementation of MREL will ensure that banks that provide essential economic functions hold sufficient resources to be resolved in an orderly way, without recourse to public funds, and whilst allowing households and businesses to continue to access the services they need.”