RRPs or Living Wills have been proposed by international regulatory and political bodies including the G20 and the Financial Stability Board as part of reforms to make the financial system safer. On 9 August the FSA published its consultation and discussion paper (http://www.fsa.gov.uk/pages/Library/Policy/CP/2011/11_16.shtml) on RRPs, prepared with the assistance of the Bank of England and the Treasury. This follows a pilot RRP project involving six of the largest UK firms which helped to develop policy on RRPs.
The consultation section of the FSA paper contains the proposals for the RRPs to be prepared by banks and large investment firms. The Recovery Plan requires firms to identify options to recover financial strength from severely adverse conditions. Firms will have to submit a Resolution Pack which provides a strategy to resolve a failed firm with minimal impact on financial stability or reliance on public sector support. The Authorities will then use each firm’s Resolution Pack to prepare a Resolution Plan.
Proposals are also made for a CASS Resolution Pack (CASS RP), to provide the speedier return of client money and assets upon a firm’s failure.
The discussion paper explores matters relevant to the resolution of financial services firms. Responses (http://www.fsa.gov.uk/pages/Library/Policy/CP/2011/cp11_16_response.shtml) are requested by 9 November. Firms will have until June 2012 to prepare initial RRPs. RRP policy as it relates to deposit-takers and systemic investment firms will eventually fall under the remit of the Prudential Regulation Authority (PRA).
The CASS RP policy will come into effect six months after the final rules are published in Q1 2012.