On January 16, 2015, the UK’s PRA and Financial Conduct Authority (“FCA”) published their policy statements including final rules implementing the BRRD. The PRA also published supervisory statements on resolution and recovery planning. The PRA rules will apply to banks, building societies and PRA-designated investment firms from January 19, 2015. However, the requirement for contractual recognition of bail-in will be phased in from February 19, 2015. The obligation will apply to any debts issued, entered or arising after February 19, 2015 which are an unsecured liability, an Additional Tier 1 instrument or a Tier 2 instrument. From December 31, 2015, the obligation will apply to all liabilities entered by relevant firms issued, entered or arising after December 31, 2015.
The PRA was asked to allow smaller firms to submit recovery plans in a simpler form and less frequently but the PRA has decided not to do so. Smaller firms whose key prudential metrics do not change over the course of a year may decide that the information, plans and triggers from the previous year continue to be appropriate. Globally systemically important firms must include four scenarios in their recovery plans, other firms must include three. The PRA expects firms to use existing stress testing as the foundation to build scenarios. Third country branches will not be required to prepare resolution plans as a matter of course. If the PRA considers that the resolution planning that applies to the whole firm is not suitable, it may require that branch to submit a recovery plan. The PRA is keeping the requirement for trading book wind-down analysis and information to be included in the recovery plan for firms with large trading books, albeit the BRRD does not require such information.
The FCA rules will apply from January 19, 2015, except for the requirement for contractual recognition of bail-in which will apply from January 1, 2016. The FCA rules apply to investment firms that are prudentially regulated by the FCA that are IFPRU 730K firms and group entities where the group includes a 730k investment firm or credit institution. The FCA is phasing in the time from which relevant firms will need to submit recovery plans, starting with the largest firms at the end of June this year. By June 30, 2016, all relevant firms will be required to file recovery plans with the FCA. Large firms will need to file annual recovery plans while smaller firms need only submit the plans every two years. Relevant firms will also need to submit information for resolution planning to the FCA, with larger firms filing the information by June 30, 2015 (and every two years thereafter) and smaller firms filing the information from December 31, 2015 (and every three years thereafter). The FCA and the PRA are the UK national regulators under the BRRD and the BoE is the appointed resolution authority.
The PRA policy statement and final rules are available at: http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps115.pdf; the supervisory statements are available at: http://www.bankofengland.co.uk/pra/Documents/publications/ss/2015/ss1813update.pdf and http://www.bankofengland.co.uk/pra/Documents/publications/ss/2015/ss1913update.pdf; and the FCA policy statement and final rules are available at: http://www.fca.org.uk/static/documents/policy-statements/ps15-02.pdf.