Section 12AA(1)

When the Bank of England exercises the fourth stabilisation option, it must use the powers conferred by sections 12A, 48B to 48W and 48Z and this section in a way which ensures that— existing Common Equity Tier 1 instruments of the bank are cancelled, transferred or diluted in accordance with the principle that losses should be borne first by the holders of such instruments, the principal amount of Additional Tier 1 instruments is reduced or converted (directly or indirectly) into Common Equity Tier 1 instruments (or both), to the extent of the capacity of the Additional Tier 1 instruments, the principal amount of Tier 2 instruments is reduced or converted (directly or indirectly) into Common Equity Tier 1 instruments (or both), to the extent of the capacity of the Tier 2 instruments, where the total of any reduction or conversion pursuant to paragraphs (b) and (c) is less than the shortfall amount, the principal amount of subordinated debt that is not within either of those paragraphs is— reduced or converted (directly or indirectly) into shares or other securities, or both reduced and so converted, in accordance with the hierarchy of claims in normal insolvency proceedings, by the difference or to the extent of the capacity of those instruments, whichever is lower, and losses are born by the holders of shares of the bank that are not within paragraph (a), (b) or (c) in accordance with the hierarchy of claims in normal insolvency proceedings, where the total of any reduction or conversion pursuant to paragraphs (b), (c) and (d), and any reduction or conversion pursuant to subsection (6), is less than the shortfall amount, the principal amount of, or outstanding amount payable in respect of, the remaining bail-in liabilities is reduced or converted (directly or indirectly) into shares or other securities, or both reduced and so converted, in accordance with the hierarchy of claims in normal insolvency proceedings, by the difference or to the extent of their capacity, whichever is lower.

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Source: legislation.gov.uk · retrieved 2026-09-04