December 18, 2018

BoE and PRA are consulting on the resolvability assessment framework (RAF) package. The two consultation papers that make up the package are an important step in BoE's commitment to Parliament that major UK banks will be fully resolvable by 2022. The consultations close on April 05, 2019. Also published was an "Introduction to the Resolvability Assessment Framework," which contains an overview of the RAF, along with a foreword from Jon Cunliffe, Deputy Governor for Financial Stability, and Sam Woods, Deputy Governor for Prudential Regulation, and CEO of PRA.

The package comprises three main components:

  • A BoE consultation paper, which proposes how the BoE, as the resolution authority, intends to assess individual banks' resolvability and the three outcomes it deems necessary to support a successful resolution. These three outcomes are having adequate financial resources; being able to continue to do business through resolution and restructuring; and being able to coordinate and communicate within BoE, with authorities and markets so that resolution and restructuring are orderly.  The BoE consultation paper would apply to UK firms whose resolution strategy is a Bank-led bail-in or partial transfer and to material UK subsidiaries of international firms for the purposes of setting internal minimum requirement for own funds and eligible liabilities (MREL) in the UK.
  • A PRA consultation paper (CP31/18), which contains proposed requirements for banks to assess their preparations for resolution, identifying any risks to implementation and their plans to address these risks. Banks will be required to submit their assessments of their preparation for resolution to PRA by September 2020 and to publicly disclose a summary of that assessment by June 2021. This would apply to the largest UK banks with at least GBP 50 billion in retail deposits on an individual or consolidated basis. 
  • Announcement that BoE will publish a statement about its assessment of resolvability of each firm, highlighting any shortcomings where it believes there is more work to do. Firms’ summaries and Bank statements are planned to be published at the same time.

Related Links

Comment Due Date: April 05, 2019

Keywords: Europe, UK, Banking, Resolution Framework, Resolution Planning, Internal MREL, PRA, BoE