Resolvability Assessment Framework

The Resolvability Assessment Framework sets out how we will assess how prepared firms are for resolution.

Overview

The Resolvability Assessment Framework (RAF) sets out how the Bank of England (‘the Bank’), as the UK’s resolution authority, assesses UK financial firms’ resolvability and introduces a public disclosure regime.

It builds on the work since the financial crisis to create a resolution regime that ensures firms can fail in an orderly way. The framework is designed to make resolution more transparent, better understood and more successful. We expect it to help market participants make more informed investment decisions. 

The Bank must be confident that it could use its powers effectively to resolve a firm if needed. This means protecting public funds, avoiding significant adverse effects on the financial system, and ensuring continuity of banking services and critical functions. 

The RAF applies to UK firms notified by the Bank that their preferred resolution strategy is bail-in or partial-transfer and material subsidiaries of overseas-based firms operating in the UK. It makes firms responsible for demonstrating how prepared they are for resolution.

Firms need to be able to show how the preferred resolution strategy set for them  could be carried out in an orderly way. This includes showing that they have identified any risks to their successful resolution. 

The Bank and Prudential Regulation Authority (PRA) published this framework in July 2019, following a consultation. 

Key parts of the RAF

By holding firms accountable to regulators, the public and their investors, the RAF helps to ensure that firms would be able to fail in an orderly fashion without causing excessive disruption to the UK financial system.

The RAF has three main components:

  1. How the Bank, as the UK’s resolution authority, will assess resolvability, building on work firms and the Bank have already done. The statement of policy, The Bank of England’s approach to assessing resolvability, outlines the outcomes the Bank is looking for from firms  to support resolution. Firms will use existing Bank and PRA policies, as well as new policies published alongside the RAF, to understand the objectives and principles they should meet.

  2. A new Resolution Assessment Part of the PRA Rulebook that requires major UK firms (retail deposits greater than £50 billion) to assess their preparations for resolution, which must include the identification of any risks to successful resolution and plans in place to address those risks. Relevant firms must submit a report of that assessment, and publish a summary of their most recent report (public disclosure). The PRA Supervisory Statement SS4/19 Resolution assessment and public disclosure by firms sets out what the PRA expects these firms to do. It also highlights that senior management should be accountable for this work within firms.

  3. The Bank’s intention to publish information on the resolvability of each major UK firm and where we believe there is more work for them to do. 
This page was last updated 17 September 2019
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