BoE and PRA launched a package of proposals on the resolution policy in UK. The package includes three consultation papers, two of which relate to amendments to the reporting and disclosure dates of resolution assessments (CP19/20) and updates to the policy on operational continuity in resolution, also known as OCIR (CP20/20). The third consultation paper (CP18/20) addresses transposition of the revised Bank Recovery and Resolution Directive (BRRD2) into national law and has been discussed separately. Along with this package, BoE also published a consultation paper on updates to its approach to assessing resolvability and this paper is related to the proposals in CP19/20 and CP20/20. The comment period on CP19/20, CP20/20, and the BoE consultation paper on assessing resolvability ends on January 31, 2021. Comments on the PRA consultations in CP19/20 and CP20/20 and on the BoE consultation paper may be included in a single response.
PRA CP19/20: Consultation on reporting and disclosure dates
This consultation paper sets out proposals to extend, by one year, the dates by which firms are first required to submit a report of their assessment of the preparation for resolution and to first publish a summary of that report under Rule 3.1(1) and Rule 4.1(1), respectively, of the Resolution Assessment Part of the PRA Rulebook. In this consultation paper, PRA also proposes consequential amendments to the supervisory statement SS4/19 on resolution assessment and publication disclosure by firms. The consultation is relevant to UK banks and building societies with GBP 50 billion or more in retail deposits on an individual or consolidated basis, as at the date of their most recent annual accounts. The changes resulting from the feedback received would be incorporated into the final policy and would take effect following the publication of the final policy in the first half of 2021. The proposal would amend dates in the Rules 3.1(1) and 4.1(1) as follows:
- Resolution Assessment 3.1(1), to reflect that the date by which firms must submit a report of their assessment would change from the first Friday in October 2020, to the first Friday in October 2021.
- Resolution Assessment 4.1(1), to reflect that the date by which firms must publish a summary of the most recent report would change from the second Friday in June 2021 to the second Friday in June 2022.
PRA CP20/20: Consultation on operational continuity in resolution
The consultation paper sets out the proposals to revise the policy on operational continuity in resolution. The purpose of the proposals is to improve firms’ resolvability and support the approach of BoE to resolution as set out in the Statement of Policy titled ”The Bank of England’s approach to assessing resolvability.” The proposals would make amendments to the Operational Continuity Part of the PRA Rulebook (refer to Appendix 1 of consultation paper) and PRA expectations on operational continuity in resolution, with the result being a new Supervisory Statement on operational continuity in resolution (Appendix 2). The new supervisory statement would supersede SS9/16 titled “Ensuring operational continuity in resolution.” PRA proposes that the changes resulting from this consultation would take effect from January 01, 2022. The PRA intends to publish the final policy on operational continuity in resolution in the first half of 2021. Many firms' existing operational continuity in resolution arrangements may already be consistent with some of these proposals. PRA would, therefore, expect that firms would be able to leverage their existing operational continuity in resolution arrangements when considering the extent to which further work may be necessary ahead January 01, 2022.
The consultation paper is relevant for PRA-authorized UK banks, building societies, and PRA-designated UK investment firms currently in scope of, or likely to come into scope of, these Rules. For a firm to be in scope of the Rules, it must receive critical services and must meet one of the three thresholds set out in Operational Continuity 1.1.
BoE Consultation Paper: Proposed updates to approach to assessing resolvability
BoE and PRA are consulting in parallel on a package of proposals related to the policy on operational continuity in resolution. The BoE consultation proposes amendments to the Statement of Policy (SoP) on its approach to assessing resolvability, which was in 2019. This Statement of Policy, as a component of the Resolvability Assessment Framework, sets out how BoE, as resolution authority, intends to assess individual firms’ resolvability and the resolvability outcomes that BoE deems necessary to support resolution. The proposals in this consultation include:
- Changes to the Operational Continuity in Resolution section of the Approach to Assessing Resolvability SoP, including updates to how BoE would assess whether firms meet the Operational Continuity in Resolution objective and clarification of the BoE approach to assessing whether hosted material subsidiaries meet the Operational Continuity in Resolution objective in the Resolvability Assessment Framework
- Changes to resolution measures, first announced in May 2020, aimed at alleviating operational burdens on PRA-regulated firms in response to the COVID-19 outbreak (reflects changes proposed in CP19/20)
BoE is also proposing smaller amendments to the following Statements of Policy in light of the proposals in the PRA consultation paper CP20/20:
- The restructuring planning section of the Approach to Assessing Resolvability Statement of Policy (in Appendix 1 to BoE consultation).
- The BoE Statement of Policy on Restructuring Planning (in Appendix 2).
- The BoE Statement of Policy on Management, Governance and Communication (in Appendix 3).
Comment Due Date: January 31, 2021
Keywords: Europe, UK, Banking, Resolution Framework, Operational Continuity, CP19/20, CP 20/20, COVID-19, PRA Rulebook, Governance, Resolvability Assessment, Statement of Policy, PRA, BoE
Previous ArticleFCA Extends Implementation Deadline for Certification Regime
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.