Bank Resolution (Recapitalisation) Act 2025

Key Points

• New framework enabling the Bank of England to tap the FSCS to fund recapitalisation payments, supporting the resolution of a failing bank through private sale or transfer to a bridge bank.
• Increased transparency and parliamentary oversight, including requirements for reporting to the Chancellor and Parliament within set timeframes and notification of relevant parliamentary committees when recapitalisation powers are used.
• Cost recovery and wind-up rules, with recapitalisation payments treated as debts to the FSCS or its fund and provision for reimbursement if costs turn out lower or are recoverable, alongside amendments to FSMA 2000 and the Banking Act 2009.
• Policy debates over scope and safeguards, including whether the measure should cover only smaller banks or larger institutions, and considerations of executive pay, competitiveness, and growth objectives as part of the Bank’s recapitalisation duties.
• Funding mechanics and protections: a levy cap (up to £1.5 billion per year) on the banking sector, potential borrowing from the National Loans Fund if needed, affordability checks by the PRA, and protections for credit unions from levies.

Progress

Originating in the Lords, the bill moved through both Houses with a series of transparency, oversight and cost-control amendments. The Commons later deleted some provisions proposed by the Lords, and after extensive debate the bill received Royal Assent on 15 May 2025, becoming law.

Voting

In the Lords, amendments emphasising transparency and oversight were supported by most non-Labour parties, while Labour (Co-op) opposed as the amendments moved. The party splits reflected a broad cross-party consensus on stability measures, tempered by concerns about scope and costs; Labour remained the principal opposition bloc in the recorded divisions. Overall, the bill progressed with cross-party support on key governance provisions, though Labour did not back the changes in the two main divisions recorded.