Shearman & Sterling LLP | FinReg | Bank of England Publishes Dear CEO Letter on Resolvability Assessment Framework
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  • Bank of England Publishes Dear CEO Letter on Resolvability Assessment Framework

    The Bank of England has published a Dear CEO letter addressed to the CEOs of eight major U.K. banks, emphasizing the importance of the BoE's Resolvability Assessment Framework and the BoE's expectation that banks will take responsibility for their resolvability. The eight banks are in scope of the first RAF reporting and disclosure cycle.

    The RAF was finalized in July 2019 and comprises: (i) the BoE's approach to assessing resolvability; (ii) PRA rules requiring banks to assess and report on their resolvability; and (iii) public statements by the BoE on the resolvability of in-scope banks. The PRA rules apply to banks and building societies with £50 billion or more in retail deposits on an individual or consolidated basis, as do the BoE's public statements. The BoE's approach to assessing resolvability applies to firms with bail-in or partial-transfer resolution strategies and material U.K. subsidiaries of an overseas-based banking group.

    The BoE's latest Dear CEO letter emphasizes the importance of the following aspects of the RAF:
    • Maintaining a 'fit and ready' resolution regime that would reduce the risk of disruption in the event of resolution; the BoE has committed to ensuring the major U.K. banks will be resolvable by 2022;
    • Making resolution a more transparent process, including via firms' disclosures and the BoE's public statements; the first of the BoE's public statements is due to be published by June 2022;
    • Firms taking responsibility for their own resolvability, by achieving the three resolvability outcomes by January 2022 (namely: (i) having adequate financial resources in the context of resolution; (ii) being able to continue doing business through resolution and restructuring; and (iii) being able to coordinate and communicate effectively to ensure resolution and restructuring are orderly); the BoE's letter includes annexes setting out examples of good practices that firms can use to achieve these outcomes; and
    • Firms implementing robust resolvability governance, testing and capability design to ensure they can support resolvability.

    The BoE intends to engage with firms later in 2021 on the operational arrangements for the first RAF cycle.

    View the BoE's Dear CEO letter.

    View details of the RAF.

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