Article 126 Determination of minimum consolidated requirement

United Kingdom

(1)

This article applies for the purpose of determining the minimum consolidated requirement F1for each resolution group.

(2)

F2... The Bank must determine the minimum consolidated requirement, and is solely responsible for the determination.

F3(2A)

The Bank may determine a transitional period for a resolution group, during which time a transitional minimum consolidated requirement applies.

(2B)

The Bank may amend or revoke a determination under paragraph (2A), or determine a further transitional period in relation to a resolution group, at any time including where a previous transitional period has expired.

(2C)

Where the Bank determines a transitional period under paragraph (2A) or paragraph (2B), it must determine the transitional minimum consolidated requirement that applies during that period.

(2D)

The Bank may amend or revoke any determination under paragraph (2C) at any time.

F4(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

The amount of each group institution's total liabilities must include total liabilities under any derivative contracts held by the institution.

(5)

An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a netting arrangement.

(6)

F5An eligible liability must be excluded from the amount of the group institution's F6own funds and eligible liabilities if—

(a)

the instrument that creates the liability is not issued or fully paid up;

(b)

the liability is owed to, or secured or guaranteed by, the institution itself;

(c)

the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;

(d)

the liability has a remaining maturity of less than one year;

(e)

the liability arises from a derivative contract held by the institution;

(f)

the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or

(g)

the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.

(7)

For the purpose of paragraph (6)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.

(8)

The determination—

(a)

must be based on an assessment of the F7following criteria—

(i)

the need to ensure that each group institution can be resolved by the application of the resolution tools including, where appropriate, by making special bail-in provision within the meaning of section 48B of the Banking Act 2009, in a way that meets the special resolution objectives;

(ii)

the need to ensure, in appropriate cases F8, taking into account whether recapitalisation payments under section 214E of FSMA may be available, that each group institution has sufficient eligible liabilities to ensure that, if mandatory reduction provision within the meaning of section 6B of the Banking Act 2009 or special bail-in provision were made—

(aa)

losses could be absorbed; and

(ab)

the capital ratio and, if applicable, the leverage ratio, of the group institution could be restored,

to a level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;

(iii)

the need to ensure that, if the resolution plan anticipates that certain classes of eligible liabilities might be excluded from bail-in under section 48B(10) of the Banking Act 2009 or that certain classes of eligible liabilities might be transferred to a recipient in full under a partial transfer—

(aa)

each group institution has sufficient other eligible liabilities or own funds to ensure that losses could be absorbed; and

(ab)

the capital ratio and, if applicable, the leverage ratio, of the group institution could be restored,

to the level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;

(iv)

the size, the business model, the funding model and the risk profile of each group institution; F9...

(v)

the extent to which the failure of each group institution would have an adverse effect on financial stability, including, due to its interconnectedness with other institutions or entities or with the rest of the financial system, through contagion to other institutions or entities; F10 and

(vi)

relevant assessment criteria specified in F11the Bank of England’s Statement of Policy on its approach to setting a minimum requirement for own funds and eligible liabilities issued under section 3B(9) of the Banking Act 2009, as that Statement of Policy may be amended from time to time. and

(b)

must take account of any provision made in the group resolution plan for the separate resolution of a subsidiary set up in a third country.

(9)

Where the Bank makes an assessment under paragraph (8)(a) with respect to a group institution authorised by the PRA or FCA, it must make the assessment in consultation with the appropriate regulator.

Annotations

Textual amendments

F1: Words in art. 126(1) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 48(a)
F2: Words in art. 126(2) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 70(2); 2020 c. 1, Sch. 5 para. 1(1)
F3: Art. 126(2A)-(2D) inserted (1.1.2026) by The Bank Recovery and Resolution (Amendment) Regulations 2025 (S.I. 2025/862), regs. 1(2), 2(5)(a)
F4: Art. 126(3) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 70(3); 2020 c. 1, Sch. 5 para. 1(1)
F5: Words in art. 126(6) substituted (16.12.2016) by The Bank Recovery and Resolution Order 2016 (S.I. 2016/1239), arts. 1(2), 41(14)(a)
F6: Words in art. 126(6) substituted (16.12.2016) by The Bank Recovery and Resolution Order 2016 (S.I. 2016/1239), arts. 1(2), 41(14)(b)
F7: Words in art. 126(8)(a) substituted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 48(d)
F8: Words in art. 126(8)(a)(ii) inserted (1.1.2026) by The Bank Recovery and Resolution (Amendment) Regulations 2025 (S.I. 2025/862), regs. 1(2), 2(5)(b)(i)
F9: Word in art. 126(8)(a)(iv) omitted (31.12.2020) by virtue of S.I. 2018/1394, Sch. 3 para. 70(4)(a) (as substituted by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 77(5)(a))
F10: Art. 126(8)(a)(vi) and word inserted by virtue of S.I. 2018/1394, Sch. 3 para. 70(4)(b) (as substituted) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 77(5)(a))
F11: Words in art. 126(8)(a)(vi) substituted (1.1.2026) by The Bank Recovery and Resolution (Amendment) Regulations 2025 (S.I. 2025/862), regs. 1(2), 2(5)(b)(ii)

Notes on the whole SI

Textual amendments

F1: Order revoked (14.12.2023 for the revocation of art. 227) by Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 1 Pt. 2 (with s. 1(4)); S.I. 2023/1382, reg. 2(c)(x)