This consultation paper (CP) sets out proposed changes to the PRA Rulebook to implement the European Union Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), and amendments to a supervisory statement to reflect the PRA’s expectations.
The BRRD provides authorities with a common set of tools and powers for dealing with failing banks, and requires banks to facilitate this process by providing information for recovery and resolution planning purposes as well as meeting resolvability requirements.
The PRA proposes to make rules concerning recovery plans, resolution packs, intragroup financial support agreements, notification of failure or likely failure, and contractual recognition of bail-in. The requirements in the BRRD regarding recovery and resolution planning will be addressed by building on the PRA’s existing recovery and resolution planning framework which has been in force since 1 January 2014. In addition to new rules, the PRA also proposes to amend its Recovery Planning supervisory statement (SS18/13) to set out its expectations in relation to the proposed recovery plan rules.
Summary of the proposals covered by the CP
This CP covers the PRA’s proposed approach to:
(a) preparing, maintaining, and submitting recovery plans;
(b) providing information for resolution planning purposes;
(c) entering into intragroup financial support arrangements in advance of recovery;
(d) notifying the PRA of failure or likely failure; and
(e) recognising in the contracts for certain liabilities that they may be subject to bail-in.
The CP is relevant to UK banks, building societies and PRA-designated investment firms. It is also relevant to parent undertakings of firms which comprise financial holding companies, mixed financial holding companies and mixed activity holding companies.
As noted above, the PRA plans to publish final rules, policy statement and supervisory statement in mid-January 2015 and will confirm the date in due course.
The consultation closed on 19 September 2014.