No bank too big to fail, and none too small to resolve − speech by Ruth Smith

A Bank of England resolution speech by Ruth Smith, not a monetary policy document. It sets out how the UK Resolution Authority plans for small and medium-sized banks, walks through the SVB UK 2023 episode, and details a new recapitalisation payment mechanism under the Bank Resolution (Recapitalisation) Act 2025. For rates there is no signal here: this is prudential and resolvability plumbing, so the front end and the curve take nothing from it.

What’s new: Most of the substance is already public: the MREL policy update that removed MREL above minimum capital for transfer firms, and the recapitalisation payment mechanism enacted in 2025, were both known. Genuinely new is the confirmation that the Bank is reviewing the 40,000 to 80,000 transactional accounts intervention threshold, citing the new optionality from the recap mechanism and changed consumer behaviour, with an updated approach to be published in early 2027. Nothing here bears on the policy rate.

KEY FINDINGS

• A new recapitalisation payment mechanism, introduced via the Bank Resolution (Recapitalisation) Act 2025, allows the Bank to cover transfer costs up front and recover them ex-post from industry via the FSCS levy. Shifts resolution funding from public funds to an industry levy, adding optionality for resolving small and mid-tier firms without a taxpayer backstop.
• Transfer firms are no longer required to hold MREL above minimum capital requirements, while bail-in and transfer firms both remain subject to the Resolvability Assessment Framework. Reduces MREL-eligible debt issuance burden for £25-40bn transfer-strategy banks.
• The Bank is reviewing its indicative 40,000 to 80,000 transactional accounts threshold for setting a transfer strategy on sub-£25bn firms, citing the recap mechanism and changed consumer behaviour. Could reclassify which small and mid-tier banks are prepared for transfer versus BIP, changing their resolvability obligations.
• SVB UK, around £12bn in assets with a preferred strategy of BIP, was in the event resolved via private sector transfer to HSBC because customers relied on critical banking and payment services. Confirms the framework can adapt strategy in real time, underpinning confidence in small-bank resolvability.
• The Bank published an operational guide to transfer resolution in April and updated its bail-in guide, aiming to improve bid quality and transparency. Narrows execution uncertainty around transfer and bail-in, a technical rather than macro input.

FROM THE DOCUMENT

Introduced via the Bank Resolution (Recapitalisation) Act 2025, this tool is intended to cover associated losses or recapitalisation needs in a transfer via a new industry-funded safety net.

we are reviewing the indicative threshold of 40,000 to 80,000 transactional accounts as an intervention point for when a transfer strategy may need to be set for a firm under £25 billion in total assets.

However, both bail-in and transfer firms are subject to the Resolvability Assessment Framework, or RAF.

I expect that we will publish our updated approach in early 2027 and look forward to hearing industry views in due course.