UK Finance’s response to Amendments to Bank of England’s approach to setting a minimum requirement for own funds and eligible liabilities

We make the following recommendations:

  • Misalignment with FSB TLAC regime and accounting implications: BOE should review and revise its proposals relating to contractual triggers given they do not align with those of the FSB. Should the BoE persevere with its proposals on contractual triggers, existing stock of instruments should be permanently grandfathered.
  • Improvements in capital and resolution regimes: any revisions to the MREL regime should consider the significant reforms in capital and resolution regimes in the last decade and explain how they contribute or not to each aspect of the MREL regime.
  • Growth and competitiveness: like other regulators such as the PRA, the BoE should consider and publish how MREL and other proposals from the Resolution Directorate meet the government’s growth and competitiveness objectives for regulators. As the PRA has extended the implementation period for Basel 3.1 by a year, in part due to uncertainty on the impact of the still evolving US approach, the BoE should consider the impact of the resolution regime on growth, competitiveness and competition.
  • Cost benefit analysis (CBA): the BoE should undertake and publish a cost benefit analysis as part of the finalisation of the revised MREL statement of policy, for any future revisions and for other consultations. It should publish the CBA for proposals relating to contractual triggers and legal opinions for individual instruments given the industry sees no benefit in providing these but significant costs in having them prepared.
  • Co-ordination and common approach within BoE and PRA: the BoE RD and PRA should collaborate and ensure policy proposals and approaches to supervision are consistent and co-ordinated. For example, the divergence of approaches to legal opinion requirements for regulatory capital instruments between the PRA and the RD should be aligned.
  • MREL thresholds: the BoE should radically change its approach to MREL thresholds – both the assets and transaction accounts thresholds – to reflect technological advances and consumer preferences, alongside regulatory reforms in the last few years and to be consistent with major international jurisdictions such as the EU and US. There should be a single threshold in line with other jurisdictions. Should the BoE persevere with the two separate thresholds, then the BoE should:
    • fully index the total assets threshold by increasing it to £40 - 50 billion to reflect enhancements to capital and resolution regimes and GDP inflation
    • increase the transactional accounts threshold to 100,000 – 150,000 and change the use criteria to 15 transactions a month
Area of expertise:
Prudential risk, reporting and tax
UK Finance’s response to Amendments to Bank of England’s approach to setting a minimum requirement for own funds and eligible liabilities

27.01.25

Consultation Responses

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