Bank Resolution (Recapitalisation) Act 2025

A vote to support means

• —Prevents financial system collapse: Recapitalisation provides a faster, more targeted alternative to bank failure, avoiding the cascading damage to mortgages, savings, pensions, and business lending that would affect millions of UK households and companies
• —Protects taxpayers compared to alternatives: By restoring a bank's capital position rather than allowing failure, the government avoids the far larger costs of deposit insurance payouts, asset liquidation losses, and broader economic damage that occurred during the 2008 financial crisis
• —Maintains continuity of essential services: Keeps critical banking infrastructure functioning, ensuring businesses can access working capital, payroll services operate, and individuals retain access to their deposits during periods of market stress
• —Provides regulatory tools with clear safeguards: Establishes transparent legal procedures for when recapitalisation can be used, requiring that senior management and shareholders bear losses before public money is deployed, unlike ad-hoc interventions

A vote to oppose means

• —Creates moral hazard: Banks may take excessive risks knowing the government will bail them out through recapitalisation, reducing incentives for prudent management and shifting risk from financial institutions onto taxpayers
• —Lack of democratic scrutiny: Powers to recapitalise banks may be exercised by regulators during crises with limited parliamentary oversight, allowing major public expenditure decisions to occur without full democratic accountability
• —Uncertain costs to taxpayers: The act provides a mechanism for injecting public funds but doesn't guarantee full recovery of those investments, potentially creating substantial, unquantified liabilities for the public purse with unclear long-term fiscal consequences
• —Unfair burden-sharing: While shareholders and creditors may face losses, ordinary taxpayers effectively subsidise financial institutions that failed to manage their own risk, creating inequity when other sectors and individuals receive no equivalent state support