Featured Product

    SRB Issues Guidance to Ensure Resolvability of Banks Engaging in M&As

    December 07, 2020

    SRB published guidance outlining the expectations for how banks engaging in mergers and acquisitions (M&As) can ensure resolvability. The expectations provide more detail to banks on the information SRB may need as such cases progress. The guidance also offers insights into the potential effects on resolvability in areas such as maintaining sufficient loss-absorption and recapitalization capacity, integrating information systems, strengthening operational continuity and access to the financial market infrastructure (FMI) services, and rationalizing the new legal structure. SRB expects banks to share information on prospective corporate transactions that are likely to result in a material change as soon as possible.

    As laid out in the SRB Expectations for Banks policy (which was published in April 2020), any bank engaging in M&As or other corporate transactions should contact SRB to detail their intentions. In case of a relevant M&A transaction, SRB expects banks to prepare a revised resolvability work plan respecting the overall requirements. The paper aims to raise the awareness of banks conducting M&As and other corporate transactions with regard to the potential consequences on their resolvability. Banks are expected to:

    • With respect to loss-absorption and recapitalization capacity, maintain a sufficient level of capacity at the point of entry and subsidiary levels, to absorb losses in resolution, comply with the conditions for authorization, and regain market confidence post-resolution; also, review and update the mechanisms supporting the operationalization of write-down and conversion in the light of the transaction
    • With respect to integrating information systems to meet data requirements, maintain, throughout the implementation process, appropriate governance arrangements and responsibilities related to data collection and aggregation, across different areas of the bank and group entities; ensure that quality assurance capabilities remain effective and that documentation supporting data collection, aggregation and validation is updated; ensure that the information necessary for resolution planning and decisions, including Minimum Requirement for own funds and Eligible Liabilities (MREL) reporting, can be delivered timely, with a sufficient level of quality; assess their capabilities to produce SRB Dataset for Valuation and the information necessary to apply the resolution tools and to develop implementation plans in consultation with Internal resolution teams (IRTs).
    • With respect to strengthening operational continuity in resolution, following the completion of the transaction, revisit the assessment of risks to operational continuity and the identification and mapping of critical and essential services (including FMI services), operational assets, and key staff to the legal entities providing or receiving the services; prepare a plan to mitigate such risks by establishing insolvency-remote service companies, putting in place or amending service level agreements, (re-)negotiating resolution-resilient clauses in service contracts, and transferring licenses or purchasing intellectual property rights; revisit the FMI contingency strategy and plan.
    • For rationalizing the legal structure after the operation, consider, when defining the envisaged post-transaction group structure and preparing the integration plan, potential measures to facilitate the separation of core business lines and critical functions in resolution and consider, if needed, in consultation with SRB, whether certain measures could contribute to the effective application of a Single Point of Entry (SPE) or a Multiple Point of Entry (MPE) resolution approach; also assess whether additional economic functions could become critical and ensure that their operational and financial continuity can be ensured in resolution and where applicable, when the transaction is completed, revisit business reorganization plan options post bail-in and the measures to restore long-term viability

    SRB will take into account the principle of proportionality and follow a coordinated approach with supervisory authorities to avoid duplication of efforts. After the conclusion of the transaction, banks are expected to return to normal resolution planning activities, including the submission of up-to-date data in SRB resolution reports and revised documents supporting the operationalization of preferred resolution strategy.


    Related Links

    Keywords: Europe, EU, Banking, Resolvability, Mergers and Acquisitions, Proportionality, FMI, MREL, Resolution Framework, SRB

    Related Articles

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 07, 2022 WebPage Regulatory News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7860