This mechanism allows creditors to receive non-transferable contingent beneficial interests rather than traditional instruments during a bank resolution, strengthening financial stability.

The move is a response by the BoE to the lessons it drew from recent bank failures.

Commenting, Hyder Jumabhoy, Global Co-head of Financial Institutions Industry Group & EMEA Co-head of Financial Services M&A at global law firm White & Case, said: “This new mechanism is a welcome development and ensures greater stability within the UK financial sector by giving the BoE more options if confronted with a crisis involving a UK lender.

“This development reflects important lessons from historic bank failures and should provide greater confidence to global investors by reducing uncertainty around how a UK bail-in / resolution process involving US securities would work, in practice. By strengthening international regulatory coordination, it also helps ensure that bank resolution frameworks remain sufficiently robust and credible in an increasingly interconnected financial system.”