Bank of England Consults on Policy Proposals for the Valuation Capabilities of Firms to Support Resolvability

The Bank of England has published a consultation setting out policy proposals on the minimum standard of valuation capabilities that firms should have in place to ensure that their valuations are sufficiently timely and robust to support the effective resolution of the firm. In the BoE's view, limitations to a firm's valuation capabilities may constitute an impediment to resolvability where those limitations would not reliably enable valuations that support the firm's intended resolution strategy.

The consultation paper sets out the BoE's thinking around how minimum requirements for valuation capabilities would be applied and outlines the rationale behind its "timeliness" and "robustness" policy objectives. The consultation paper provides detail on proposed principles that firms would be expected to meet and summarises the rationale underlying each principle. The principles cover: (i) data and information; (ii) valuation models; (iii) valuation methodologies; (iv) valuation assumptions; (v) governance; (vi) transparency; and (vii) assurance.

The proposed policy will apply to all firms where the BoE expects to require resolution-specific valuations as a home or host resolution authority. This includes firms whose preferred resolution strategy involves the use of statutory stabilisation powers in the UK and firms that are a material UK subsidiary of an overseas-based banking group. Firms whose preferred resolution strategy is designated as modified insolvency would not be within scope of the proposed policy.

Feedback on the discussion questions is invited by November 17, 2017. The BoE intends to develop a Statement of Policy and envisages that, once a Statement of Policy has been released, firms would be given around 18 months to implement the changes necessary to comply with the policy. Comments are also invited on this proposed implementation timeframe.

View the Consultation Paper.

View the BOE Resolution Planning webpage.