EU Single Resolution Board Launches Consultation on Expectations for Banks11/08/2019The Eurozone Single Resolution Board has launched a public consultation on its proposed “Expectations for Banks”, a draft document outlining best practice for banks in implementing resolution planning. The consultation is being undertaken as part of the SRB’s endeavours to work with Eurozone banks and other stakeholders and to demonstrate transparency in its approaches and decisions. The SRB is the resolution authority for the largest Eurozone banks that are directly supervised by the European Central Bank for prudential purposes and any Eurozone banks active in more than one Member State. Responses to the consultation should be submitted by December 4, 2019.
The “Expectations for Banks” document describes the seven dimensions of Eurozone banks’ resolvability, supplemented by specific principles for complying with those principles, as follows:
- Governance: Eurozone banks should have robust governance practices to ensure the effective and timely execution of resolution strategies, including the active involvement of senior management in the operationalization of the resolution strategy;
- Loss absorbing and recapitalization capacity: Eurozone banks should have adequate capacity to absorb losses and recapitalize if necessary, including by allocating losses across a wide range of liabilities; the document also proposes a set of Minimum Requirements for Own Funds and Eligible Liabilities principles, including the maintenance of high quality eligible assets;
- Liquidity funding and resolution: Eurozone banks should establish: (i) methodologies to estimate their liquidity and funding needs in resolution; (ii) processes to measure and report their liquidity situation in resolution; and (iii) processes to identify and mobilize collateral during and after resolution;
- Operational continuity and access to financial market infrastructures: Eurozone banks should ensure that operational arrangements are in place to guarantee the continuity of services in a resolution scenario;
- Information systems and data requirements: Eurozone banks should be able to demonstrate that they have appropriate systems and technology to provide the information required for developing and maintaining resolution plans;
- Communication: Eurozone banks should develop communication plans informing stakeholders of the implications of the resolution, and governance plans that ensure effective execution of the communication plan; and
- Separability and restructuring: the structure and complicity of Eurozone banks should not stand in the way of the operational implementation of their resolution strategies.
The document also describes the dialogue that should be conducted between the SRB’s Internal Resolution Team and banks where impediments to resolvability are identified. Banks should produce a Resolvability Work Program that outlines how potential impediments are addressed.
View the SRB's "Expectations for Banks 2019".
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