Bank of England outlines third resolvability assessment framework
The Bank of England has provided details for the third Resolvability Assessment Framework (RAF) assessment, scheduled for 2026-27. The framework aims to ensure major UK firms can be resolved without taxpayer support, with firms' scenario narratives due by 2 March 2026.
Ensuring orderly firm failure
The Bank of England (BoE) highlights the critical importance of resolvability, noting that credible resolution arrangements significantly reduce financial crisis probability and the economic costs of firm failures.
This progress has enabled the Financial Policy Committee (FPC) to lower the benchmark for system-wide capital requirements.
The Resolvability Assessment Framework (RAF) has evolved to provide robust and proportionate assurance.
The third RAF assessment (2026-27) will evaluate firms' overall ability to achieve three resolvability outcomes, assess remediation progress, and include targeted testing of Continuity and Restructuring capabilities.
Firms must submit Resolution Assessment reports by 2 October 2026. The assessment concludes in June 2027 with the publication of findings.
The fourth assessment is not expected before 2029-30. Additionally, the Bank plans a review in H2 2026 of the MREL scalar for ring-fenced banks, assessing deployability of MREL resources.
Targeted tests for continuity
The Continuity and Restructuring outcome assessment involves targeted Bank-led tests.
These evaluate firms' readiness for bail-in data generation, scenario modeling, and tool deployment.
Further tests assess capabilities to identify and evaluate post-resolution restructuring options, and generate Transitional Service Agreements (TSAs).
The assessment also includes a desktop review of early termination risks for financial contracts and a dialogue on maintaining continuity of access to financial market infrastructure (FMI) via contingency plans.
These activities are linked through a hypothetical resolution scenario.
Firms can use internal scenarios, provided their severity matches or exceeds the 2025 Bank Capital Stress Test, with a forecast anchored no earlier than 31 December 2024. Firms' scenario narratives are due by 2 March 2026.