BoE released its final Statement of Policy on valuation capabilities to support resolvability. The policy statement also discusses responses to the consultation paper, which was published in August 2017. The policy includes principles for the data, information, models, governance, documentation, and assurance firms will need to have in place to support timely and robust resolution valuations. The deadline for compliance with the policy is January 01, 2021.
The broad purpose of these valuations is to inform the application of resolution tools and to ensure that the full extent of losses is appreciated on entry into resolution. Valuations will also be a key input into the Bank’s decisions around resolution more broadly. For instance, in a UK-led bail-in, valuations also inform the BoE decisions on a firm’s reorganization plan and the allocation of equity to bailed-in creditors. Furthermore, valuations help inform decisions about the recapitalization of subsidiaries, including through the write-down or conversion of intragroup claims held for purposes of meeting internal MREL. The Statement of Policy is being provided in accordance with section 3B(9) of the Banking Act 2009. The policy applies to the UK-based institutions whose preferred resolution strategy involves the use of stabilization powers and to the material UK subsidiaries of overseas-based banking groups.
The BoE power of direction applies to banks, building societies, and certain investment firms (institutions) that are authorized by PRA or FCA; parent companies of such institutions that are financial holding companies or mixed financial holding companies; and PRA or FCA-authorized financial institutions that are subsidiaries of such institutions or such parent companies. However, this Statement of Policy applies to the institutions that meet the criteria set out in paragraphs 2.1 (a) and (b) of the Statement of Policy. These criteria are aligned with those set out by the Bank for setting minimum requirements for own funds and eligible liabilities (MREL) and internal MREL above regulatory capital requirements.
Effective Date: January 01, 2021
Keywords: Europe, UK, Banking, Bail-in, Resolution Planning, Valuation Capabilities, BoE
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HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme.
The Advisory Scientific Committee of ESRB published a response, in the form of an Insights Paper, to the EBA proposals for reforms to the stress testing framework in EU.
MAS announced several initiatives to support adoption of the Singapore Overnight Rate Average (SORA), which is administered by MAS.
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.
PRA published the policy statement PS19/20 on the final policy for extending coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balance.
EBA published the final draft implementing technical standards for disclosures and reporting on the minimum requirements for own funds and eligible liabilities (MREL) and the total loss-absorbing capacity (TLAC) requirements in EU.
EBA published an erratum for the phase 2 of technical package on the reporting framework 2.10.
EC published the Implementing Regulation 2020/1145, which lays down technical information for calculation of technical provisions and basic own funds.