UK Banking Regulations 2025: New Rules for a Safer Financial Future

The UK government is rolling out new banking regulations designed to make financial institutions more resilient, particularly in the face of potential failures. Here's a straightforward breakdown of what you need to know about these changes.

What's New?

1. MREL Adjustments: The Bank of England now has more flexibility when setting Minimum Requirement for Own Funds and Eligible Liabilities (MREL) for banks and building societies. MREL is essentially a financial cushion—extra equity and debt—that banks hold to absorb losses if they run into trouble. The new rules allow the Bank of England to consider additional funds available under the Financial Services Compensation Scheme, thanks to the Bank Resolution (Recapitalisation) Act 2025.

2. Brexit Adjustments: With the UK having left the EU, the regulations have been updated to reflect this change. Now, when setting MREL, the Bank of England will follow its own guidelines rather than EU technical standards.

3. Transitional MREL: To ease the transition for growing banks, the Bank of England can now set temporary, lower MREL requirements, allowing these institutions time to build up their financial buffers gradually.

Why These Changes?

The aim is to ensure that banks have the necessary resources to handle their own failures, thus protecting taxpayers from footing the bill. By considering potential additional funds and allowing temporary flexibility for growing banks, the Bank of England can tailor requirements more closely to each institution's needs.

Impact on Businesses and the Public

The changes primarily affect how the Bank of England manages financial stability. They do not directly impose new costs on businesses, charities, or the public sector. Instead, the focus is on enhancing the resilience of the financial system as a whole.

Monitoring and Review

While there's no formal review process set in stone, the government will keep an eye on how these regulations are working in practice. The goal is to ensure they are effective in bolstering the UK's financial system without introducing unnecessary burdens.

Final Thoughts

These regulations are a proactive step toward safeguarding the UK's financial landscape. By adapting to the post-Brexit context and introducing flexible requirements, the Bank of England aims to ensure that financial institutions can withstand shocks and continue to serve the economy effectively.