The Bank of England and the Prudential Regulation Authority have published two consultation papers to outline their proposed Resolvability Assessment Framework for banks. The regime is designed to ensure that banks are, and are able to demonstrate that they are, resolvable.
The Bank of England, as resolution authority, proposes to assess the resolvability of banks against the outcomes it considers necessary to support resolution, namely: having adequate financial resources, being able to continue to do business through resolution and restructuring and being able to coordinate and communicate within the bank, with authorities and with markets to ensure that resolution and restructuring are orderly. The Bank would also make a public statement about the resolvability of each firm, including identifying any shortcomings.
The PRA, as prudential supervisor, is proposing new rules to require banks to undertake a preparedness assessment for resolution every two years. A bank would have to submit a report of the assessment to the PRA and would have to publish a summary of the assessment publically. It is proposed that the first report would need to be submitted to the PRA by September 2020, and the summary would need to be published by June the year after.
The hope is that by making resolution more transparent and better understood, it will ultimately make resolutions more likely to be successful, through allowing firms to fail in an orderly way and causing minimum disruption to the wider UK financial system.
The consultations are open until 5 April 2019.