UK recovery and resolution

Read about the recovery and resolution regime for certain firms that we prudentially regulate, including which firms are affected and what you need to do.

The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (UK RRD) makes amendments to the pre-existing legislation that sets out the recovery and resolution regime for certain investment firms that we prudentially regulate.

UK recovery and resolution: an overview

Adoption of the Bank Recovery and Resolution Directive (RRD) in May 2014 was one of a number of EU initiatives to reduce future threats to financial stability in the wake of the 2008 financial crisis. 

In addition, a range of technical standards and non-binding guidelines and recommendations have since been adopted to complete the legislative package.

As transposed by the Treasury in December 2020, the updated Bank Recovery and Resolution Directive (BRRD II) does not make any change to the recovery and resolution regime for investment firms that we prudentially regulate.

RRD was implemented into UK law through several statutory instruments that amended existing UK legislation, our rules, and the Prudential Regulation Authority (PRA) rules. 

Our rules are contained in Chapter 11 of our Prudential sourcebook for Investment Firms (IFPRU). UK RRD ensures that a minimum set of tools and powers are available in the UK relating to:

  • planning to help the recovery of firms in financial difficulty
  • early intervention in the event of problems
  • the resolution of failed firms in a way that reduces the costs to the public and mitigates the impact on the financial system

UK RRD aims to make it less likely that banks and investment firms will fail. Where a failure does occur, it should lessen the potential negative impacts on markets, the firm’s customers, and the financial system.

Find out more about the key elements of the RRD

UK RRD: our role

We prudentially regulate most investment firms that are subject to the UK RRD. 

UK RRD designates the Bank of England as the UK’s resolution authority, responsible for developing resolution plans and taking resolution actions when required. 

This means that not all aspects of the UK RRD have to be implemented by us. Many aspects fall within the remit of the Bank of England in its capacity as the resolution authority.

Firms that are affected

UK RRD applies to:

  • investment firms that we prudentially regulate and that meet the definition in our Handbook of an IFPRU 730k firm
  • group entities in a group that contains a 730k investment firm or credit institution; this also includes certain types of firms that we authorise

What you need to do

All IFPRU 730k investment firms and group entities in a group that contains an IFPRU 730k investment firm or credit institution, should review the changes to our Handbook we published in January 2015 when the RRD was originally implemented. 

You should also review the changes we published in preparation for Brexit. 

You should then establish how these rules affect your business and take any steps necessary to comply with them.

Binding Technical Standards (BTS)

All the relevant BTS mandates for RRD have been brought into UK law, with responsibility for meeting these mandates transferred to us, the PRA and the Bank of England. 

We, the PRA and the Bank have corrected deficiencies in the RRD BTS so they operate effectively following Brexit. For details of our approach to making onshoring amendments to the relevant RRD BTS, please refer to our Consultation Paper CP18/36.

EBA guidelines

In CP18/28 and CP18/36, we explained our approach to a broad range of non-legislative materials produced by the European Supervisory Authorities (ESAs), known as EU Level 3 material. 

It was decided not to incorporate the EU Level 3 material into UK law. 

Nevertheless, we consider that the EU non-legislative material remains relevant after Brexit, and therefore, we expect financial institutions and other market participants to continue to apply ESA Guidelines and Recommendations as they did before Brexit.

Affected firms and group entities should familiarise themselves with the European Banking Authority (EBA) guidelines via its website.

Page updates

09/12/2020: Information added BRRD II: Implications for FCA-solo regulated 730k firms