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Home > Prudential Regulation Authority > Ensuring operational continuity in resolution – CP38/15 UPDATED
 

Ensuring operational continuity in resolution – CP38/15 UPDATED

15 October 2015

11 December 2015 - This consultation paper has been updated see:

Ensuring operational continuity in resolution – Addendum to CP38/15

Background

This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA’s) proposed framework to require firms to ensure continuity of critical shared services to facilitate recovery action, resolution or post resolution restructuring.

It follows the discussion paper DP1/14 ‘Ensuring operational continuity in resolution’ published in October 2014. It develops the principles set out in DP1/14 and proposes draft rules and a supervisory statement.

It is one of two papers published by the PRA on 15 October 2015, which forms part of the post-crisis reforms to enhance the resilience and resolvability of firms. The proposals support the resilience and resolvability of banks, building societies and PRA-authorised investment firms by seeking to ensure critical shared services are arranged in a way that facilitates continuity in the event of a failure. Restructuring efforts, through ring-fencing of core activities, set out in CP37/15 ‘The implementation of ring-fencing: consultation on prudential requirements, intragroup arrangements and market infrastructure’, will support bank resolvability and increase the resilience of ring-fenced bodies (RFBs) to risks originating in other parts of its group or the global financial system and facilitate restructuring of banking groups before and after resolution.

This CP is relevant to banks, building societies and PRA-authorised investment firms.
It is also likely to be of interest to policymakers and practitioners involved in the resolution of failed firms.

The PRA intends the scope of the rules to be limited to those firms that receive critical shared services supporting functions that are critical to the economy. This CP does not define a precise boundary for firms but provides clarity on the proposed policy to enable firms, particularly RFBs, to start planning their approach.

The PRA will issue an addendum to the consultation defining the scope of application in due course.

Summary of Proposals

The main areas that are set out in the CP include ensuring the critical shared services provider:

  • has arrangements in place that are capable of being continued or replaced in resolution and are well documented;
  • has sufficient financial resources and capability to allow the firm to operate in resolution and the service arrangements are capable of being restructured;
  • if in a group, has clearly defined reporting lines that are capable of continuing in resolution; and
  • if in a group, is structured so that upon failure or resolution, no group entity receives preferential access to critical services over another.

Readers may also wish to refer to CP37/15 ‘The implementation of ring-fencing: consultation on prudential requirements, intragroup arrangements and market infrastructure’ also published on 15 October 2015 and PS10/15 ‘The implementation of ring-fencing: legal structure, governance and the continuity of services and facilities’ published on 27 May 2015. Further information is available on the dedicated ‘Structural reform’ webpage – see Related Links.

Responses

The PRA invites feedback on the proposals set out in the consultation, but respondents may wish to wait for the publication of the addendum, which will set the application of the rules and closing date for the consultation period.

Please address any comments or enquiries to CP38_15@bankofengland.co.uk.  

Consultation Paper

Ensuring operational continuity in resolution – CP38/15

Ensuring operational continuity – Addendum to Consultation Paper CP38/15

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