Part IV The UK Resolution Regime, 12 United Kingdom—General Approach

Subject(s):

Bank resolution and insolvency — Credit risk — Equity — Bank of England

This chapter explains how the UK bank resolution is managed, as the United Kingdom is unusual amongst EU countries in a number of ways as regards resolution. In particular, the UK authorities have set out in their approach documents a detailed plan as to how resolution powers might be used in different circumstances, and these plans are described and analysed. The basis of the approach is the division of bank resolutions into three phases: the stabilization phase, in which the provision of critical economic functions is assured, either through transfer to a solvent third party or through bail-in to recapitalize the failed firm; the restructuring phase, during which any necessary changes are made to the structure and business model of the whole firm or its constituent parts to address the causes of failure; and the exit from resolution, where the involvement of the resolution authority in the failed firm and any successor firms comes to a close. The chapter also considers the special regimes—the bank insolvency regime, the bank administration regime, and the investment firm special administration regime.