The Treasury has published a draft annex to the Code of Practice that authorities must consider when exercising the powers under the Special Resolution Regime (SRR) created by the Banking Act 2009. This draft annex covers the likely use that authorities will make of the new bail-in tool, which is currently being discussed in Parliament as secondary legislation under the Banking Reform Bill. The new tool comprises the power to cancel, modify or convert a bank's liabilities provided that the affected creditors do not incur greater losses than those that would have been incurred had the bank entered insolvency proceedings ("no creditor worse off" principle). The proposed annex also states the principle that, when using the tool, authorities should respect the creditor hierarchy in insolvency, but contemplates the possibility that they treat liabilities in the same class differently where this is warranted by expediency, systemic or value preservation concerns. Concerning the bail-in of derivatives, the annex clarifies that, when closing out open positions, authorities will follow the applicable contractual provisions so far as possible and will only bail-in the non-secured part of a counterparty's exposure to the bank. The Treasury will make a safeguards order, similar to that in relation to partial property transfers, requiring the protection of netting, among other arrangements. When the Bank of England decides to use the bail-in tool, it must submit a report that the Chancellor will lay before Parliament. (Source: Banking Reform Bill: Government Notes on Amendments: SRR Code of Practice Annex)