One area where a barrier to resolvability may arise is where the Bank is unable to obtain sufficiently timely and robust valuations to support the effective use of resolution tools. Timely and robust valuations are critical to ensuring that resolution action is sufficient to address the full extent of losses, that creditors are treated fairly through resolution, and that risks to public funds are minimised.
The Bank has released its final Statement of Policy on valuation capabilities to support resolvability. The policy statement also discusses responses to the consultation paper published in August 2017. The policy includes principles for the data, information, models, governance, documentation, and assurance firms will need to have in place to support timely and robust resolution valuations. The deadline for compliance with the policy is 1 January 2021 (please see the update below from 7 May 2020, amending this deadline to 1 April 2021).
Update 7 May 2020
The Bank and PRA announced on 7 May 2020 measures to alleviate operational burdens on firms in response to the Covid-19 outbreak. Among these measures, the Bank announced the compliance deadline for the Bank’s Statement of Policy on Valuation capabilities to support resolvability has been extended by three months from 1 January 2021 to 1 April 2021. Firms should be compliant with the Valuations Statement of Policy by 1 April 2021 unless otherwise communicated by the Bank.