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
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.