BoE Addresses Banks in Scope of First Resolvability Assessment
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle. The first RAF report submissions are due in October 2021. This letter, by Dave Ramsden of BoE, emphasizes the importance the regulator places on this exercise and sets out examples of good practices to assist firms in achieving the expected resolvability outcomes. The letter urges firms to focus on maintaining a "fit and ready” resolution regime, making resolution a more transparent process, being responsible for their own resolvability, and establishing effective assurance arrangements. BoE expects to engage with firms later in 2021, on the operational arrangements for the first RAF cycle.
The RAF sets out what firms need to do to be considered resolvable by BoE. The letter highlights that BoE aims to maintain a “fit and ready” resolution regime: fit for the purpose of maintaining financial stability and market discipline and ready to be put into action to deal with the failure of one or more banks. BoE has committed to the UK Parliament that major UK banks will be resolvable by 2022. To make this happen, firms need to prepare in advance by identifying, designing, and implementing the capabilities necessary to enable the resolution process to be executed in an orderly manner. The letter also points out that a combination of firms disclosures under the RAF and public statements by BoE will reinforce existing initiatives to make the UK resolution regime more transparent and better understood. By allowing firms to demonstrate their progress through high-quality disclosures, the RAF also presents firms with a strategic opportunity to reinforce their reputation as safe and sound financial institutions. In this context, the BoE's public statement on resolvability, to be published by June 2022, will include views on individual firms.
The letter also points out that, as set out in the RAF Statement of Policy, firms need to be able to achieve the three resolvability outcomes by January 2022: have adequate financial resources in the context of resolution, be able to continue to do business through resolution and restructuring, and be able to coordinate and communicate effectively within the firm and with the authorities and markets to ensure that resolution and subsequent restructuring are orderly. The Annex to the letter presents examples of good practices that can assist firms in designing and implementing resolvability capabilities to meet these three resolvability outcomes. Where there is any feedback on progress to date that is specific to a firm, BoE has provided this privately to firms in a second annex. Additionally, the letter emphasizes that, as set out in the RAF Statement of Policy, firms should apply their own assurance arrangements to ensure they have the necessary measures in place to support resolvability. During the first RAF cycle, BoE will particularly focus on examining how Boards and senior management have approached their responsibilities. In this context, BoE may engage with independent members of firms’ Boards in advance of the cycle to understand Boards’ anticipated approaches.
Related Links
Keywords: Europe, UK, Banking, Resolvability Assessment Framework, Resolution Framework, Reporting, Disclosures, BoE
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Related Articles
HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
EBA Guide to Monitor Threshold for Intermediate Parent Undertakings
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
ESMA Group Issues Recommendations on RFR Switch in Interdealer Market
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
ECB Study Assesses Impact of Basel III Finalization Package
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
PRA Updates Remuneration Policy Statement Templates and Tables
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.
