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.
Keywords: Europe, UK, Banking, Resolvability Assessment Framework, Resolution Framework, Reporting, Disclosures, BoE
Previous ArticlePRA Identifies Error in Remuneration Part of the Rulebook
The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.