Following the decision to remove FCA regulated 730k investment firms from the scope of the UK resolution regime, the government is now consulting on whether short-term liabilities owed to FCA investment firms should continue to be excluded from the BoE’s bail-in power under Section 48B of the Banking Act (BA) 2009. Sections 48B and 48D of the BA 2009 relate to the liabilities owed to firms within the scope of the UK resolution regime. Currently S48B(8)(d) means the BoE’s bail-in power cannot be used to bail-in liabilities with an original maturity of less than 7 days owed by the bank to a credit institution or 730k investment firm.
The Government is proposing to amend the definition of ‘investment firm’ in Section 48D to capture PRA-designated investment firms and FCA-regulated investment firms with permission to underwrite or deal on own account (ie those that will be subject to the new £750,000 initial capital requirement under the FCA’s new rules). This would mean that short-term liabilities owed to these firms will continue to be exempt from bail-in.
The consultation forms part of the wider steps the government is taking to enforce the effective implementation of the IFPR and the outstanding Basel III standards.
The consultation closes on 5 October 2021.