Bank Resolution (Recapitalisation) Bill [Lords] 2025-01-22

The Bank Resolution (Recapitalisation) Bill will enhance the UK’s resolution regime by giving the Bank of England a more flexible toolkit to respond to bank failures. The Bill creates a recapitalisation mechanism that ensures certain costs do not fall to taxpayers, strengthening protections for public funds and financial stability while supporting the competitiveness and growth of the UK financial sector.

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Asked for a clearer explanation of the Bill's benefits to constituents. The Minister responded by explaining that it prevents taxpayer liability in small bank failures and ensures better protection for depositors above £85,000 thresholds through resolution mechanisms rather than insolvency.

Welcomed the Bill but questioned whether it adequately minimizes taxpayer liability by prioritising losses to shareholders and bondholders before depositors. The Minister agreed, noting that public funds would only be involved if other measures fail.

Welcomed the Bill, praising its origins in lessons learned from Silicon Valley Bank's failure and the robustness of UK banking reforms. He highlighted HSBC’s role and the need for additional transparency to ensure confidence in the Bank of England’s independence.

The Economic Secretary presented arguments against the use of a new funding mechanism for larger institutional banks, emphasising potential costs and risks. They cited concerns about recapitalisation requirements being many times higher than the annual cap of the Financial Services Compensation Scheme and the need to ensure that using insolvency procedures remains the default position.

Jogee welcomed the Economic Secretary and expressed support for the Bill. He inquired about how the Bill would protect workers' payslips and enhance growth, particularly for his constituents in Newcastle-under-Lyme. Jogee emphasised the importance of ensuring that the benefits and skills generated by the City of London reach regions like Staffordshire.

Cooper highlighted the challenges faced by constituents due to the cost-of-living crisis and expressed support for the Bill's aim to prevent taxpayer-funded bank bailouts. She acknowledged improvements in reporting and accountability but raised concerns about the scope of the mechanism, particularly regarding its use for larger banks.

The right hon. Member for North West Hampshire questioned the certainty and predictability provided by the Bank Resolution Bill, highlighting concerns about how decisions are made during financial crises. He raised issues around short-term funding denials and insolvency procedures, suggesting the need for a code of conduct to protect competition.

The hon. Member for Worcestershire thanked contributors and raised questions on the amendment's support, reassurance from the Bank of England’s code of practice regarding insolvency procedures for failing smaller banks, and balancing continued use of the bank levy against economic growth.

The shadow Economic Secretary raised concerns about reducing the risk of small banks requiring public funding upon failure. There is cross-party support for this, indicating a broad agreement on the necessity of enhancing the resolution framework.

The hon. Member for St Albans focused on proposed size limits for banks and questioned whether a wider growth objective should be inserted for the Bank of England, suggesting flexibility is crucial in bank resolution strategies.

My hon. Friend asked about the impact on ordinary workers and highlighted that a stable banking sector underpins economic stability and supports wage growth across the country, advocating for measures to maintain confidence in the financial system.