SARB on Group Structure Reporting Requirements for Resolution Planning
SARB published a discussion paper that sets out criteria to identify resolution groups. In other words, the criteria is to identify which entities in a financial conglomerate should be treated as part of a designated institution and which entities could be excluded without affecting the ability of SARB to conduct an orderly resolution. These criteria will also inform future reporting requirements of designated institutions on their group structures, for resolution planning purposes. SARB is requesting comments on the paper by November 30, 2020.
The development of a feasible resolution plan is dependent on a good understanding of the group structure and the identification of relevant entities in the group that will play an important role to achieve an orderly resolution. The existing regulatory requirements for the reporting of group structures are not suitable for the identification of resolution groups. For example, the "Regulations relating to Banks" require banks to submit a group structure that identifies all interest held as at March 31 and September 30 of each year, or in the event of any major change in the group structure. This regulation potentially results in very detailed and lengthy group structures, without sufficient background information to identify resolution groups. A similar situation may arise with the reporting of financial conglomerates to which non-bank systemically important financial institutions belong. In order to identify resolution groups and group entities that should be excluded by the Governor from the definition of designated institutions, more specific requirements on the reporting of group structures will be placed on designated institution.
The discussion paper sets out the proposed entities that should be reported to SARB in order to facilitate the identification of resolution groups. These entities include banks, non-bank systemically important financial institutions, payment system operators and participants of a systemically important payment system, holding companies, market infrastructures, and resolution support entities. For certain reportable entities, SARB will also require information about their ownership structures at a minimum level of detail. An understanding of the ownership structure is important when identifying applicable resolution actions, for example, to assess contagion effects if shareholders and creditors are to be bailed in. The format in which this information has to be reported is illustrated in Annexure A of the paper, which provides an illustration of a hypothetical group structure, as well as Annexure B, which sets out the relevant reporting template.
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Comment Due Date: November 30, 2020
Keywords: Middle East and Africa, South Africa, Banking, Reporting, Resolution Framework, Resolution Planning, SARB
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