BoE published a report on the evaluation of its resolution arrangements by the Independent Evaluation Office (IEO). The report makes recommendations for establishing the roadmap to 2020, working together in structural separation, and preparing for executing a resolution. BoE also published its response to this evaluation.
The IEO concludes that the work of BoE with the industry means that firms are more resolvable now than they were during the crisis and costs of failure would increasingly be absorbed by investors, rather than taxpayers. However, much work remains to be done if the major UK banks are to be fully resolvable by 2022. The following are the highlights of the IEO recommendations:
- Articulate how the institution as a whole will deliver on making the resolution framework operational
- Review appropriateness of the Resolution Directorate skillset as its focus shifts from policy development to implementation
- Consider whether the introduction of the gone-concern regime has been appropriately reflected in PRA supervisory strategy
- With due regard to the legal framework, consider mechanisms to enable greater and timely information-sharing and cross-bank collaboration on resolution issues
- Review governance arrangements for business-as-usual resolution matters
- Formalize governance arrangements for heightened contingency planning
- Set out a strategy internally on how the Bank would deal with a fast death of a firm
- Review the skills needed for heightened contingency planning and agree on a framework for the rapid mobilization of resources
- Agree on a comprehensive schedule of exercises to test the Bank’s operational preparedness for a resolution
In its response to the evaluation, BoE welcomed the IEO evaluation, which recognizes that the Bank has led the way internationally in developing the resolution policy framework and that the decision to prioritize policy development and communication have yielded clear benefits. BoE also welcomed the IEO’s endorsement of the Bank’s decision to make the implementation of the resolution framework one of a small number of strategic goals. The implementation of the IEO’s recommendations will support the Bank to deliver this demanding goal. The Court of BoE had commissioned the IEO to review the effectiveness of the resolution arrangements of BoE.
Keywords: Europe, UK, Banking, Resolution Framework, Assessment of Implementation, Roadmap, BoE
Previous ArticleFSB Issues Thematic Peer Review on Bank Resolution Planning
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS published a statement guidance on dividend distribution by banks.
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.