Smith sets out resolution rules review for smaller UK lenders

Ruth Smith highlighted that the UK categorises lenders into three tiers, with firms below £25 billion in total assets typically earmarked for the Bank Insolvency Procedure (BIP).

However, specialized deposit bases or critical payment services can make standard liquidation unviable.

The March 2023 failure of Silicon Valley Bank UK demonstrated that rapid private transfers protect customer access and systemic stability far better than insolvency payouts.

Under the Bank Resolution (Recapitalisation) Act 2025, authorities can now fund upfront transfer costs and shortfalls using an industry-backed levy rather than taxpayer money.

Consequently, transfer-strategy firms no longer need to maintain expensive loss-absorbing capacity above minimum capital requirements.

The Bank of England is reviewing the indicative threshold of 40,000 to 80,000 transactional accounts used to determine when lenders under £25 billion require a transfer strategy.

Smith explained that changing consumer banking patterns require updated benchmarks.

The central bank is collaborating with the Prudential Regulation Authority (PRA) to streamline regular reporting demands for smaller firms.

“A firm's resolvability journey is never done,” Smith noted, confirming that the revised resolution framework will be published in early 2027.