BoE publishes resolution approach document: BoE has published an approach document setting out how it would deal with resolving a failed bank, building society or investment firm. It looks at the tools BoE has and what it will seek to achieve, as well as how it will work to protect creditors and counterparties. The document describes three key stages of resolution which firms would go through:
- stabilisation: first, BoE will decide on the most appropriate method to stabilise the firm, whether through transferring some of its business to a third party or through bail-in to recapitalise the failed firm;
- restructuring: next, the firm must restructure to address the causes of failure and restore confidence; and
- exit from resolution: the firm will either cease to exist or be restructured and no longer in need of liquidity.
BoE launches FICC markets review: As part of its Fair and Effective Markets Review, BoE has launched a consultation into fairness and effectiveness of the fixed income, currency and commodities (FICC) markets. The consultation seeks to define "fair and effective" FICC markets and to identify and assess the key structural and conduct drivers currently making FICC markets unfair or ineffective in light of those definitions. Structural drivers are further broken down into (i) market microstructure; (ii) competition and discipline; and (iii) benchmarks. In turn, the focus of the conduct assessment is (i) standards of market practices; (ii) responsibilities, governance and incentives; and (iii) surveillance and penalties. The consultation also raises a series of proposals for further reform, including:
- standardisation of more FICC assets;
- greater use of electronic platforms;
- improvements to benchmark design;
- introducing a global code of conduct for FICC markets;
- bringing certain FICC trading into the scope of regulation;
- more effective control and incentive structures;
- greater use of electronic surveillance; and
- ensuring HR decisions consider employee conduct and that stronger penalties are imposed on staff breaching guidelines.
BoE asks for comments by 30 January 2015. It will publish its recommendations in June. (Source: Fair and Effective Markets Review October 2014)