Bank resolvability: a redoubling of regulatory efforts

Resolvability

The last few weeks have seen a flurry of activity on the resolvability front. Lest anyone think momentum was seeping out of the decade-long push to make banks resolvable – and thereby end “too big to fail” – these developments suggest a redoubling of regulatory efforts to demonstrate that the framework will work. Each of the initiatives is important in its own right, but taken together they amount to a raising of the bar in terms of resolution preparedness, particularly identifying and dealing with impediments to resolution. Major banks in the UK and the Banking Union can expect greater focus on resolution authorities’ assessment of their resolvability – and in the UK, the prospect of this assessment being made public. We have also had a very clear signal from the Bank of England (BoE) of what it expects of major UK banks' valuation capabilities for resolution purposes, and are approaching some key milestones for the Single Resolution Board (SRB)’s multi-year work programme. There continues to be progress on targets for MREL (the minimum requirement for own funds and eligible liabilities), albeit with some potential obstacles on the way there. We take the UK, Banking Union, and MREL developments in turn below.

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Posted on 11/07/2018 | 0 Comments

Bank and FCA up the ante on operational resilience expectations

Bank and FCA

The Bank of England (BoE) and the Financial Conduct Authority (FCA) have released a Discussion Paper (DP) on operational resilience, introducing enhanced expectations for Boards and senior management. The DP emphasises incident recovery – using the concept of "impact tolerance" – and highlights the regulators’ focus on the ability of firms and FMIs (collectively “firms”) to resume critical business services. The DP is of primary interest to CROs, COOs, CISOs, heads of operational resilience or cyber risk and Board members at financial services firms regulated by the BoE, FCA or Prudential Regulation Authority (PRA).

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Posted on 10/07/2018 | 0 Comments

So, you think you need to be a bank?

Bank

In 2010, Metro Bank was the first high street bank to be launched in the UK for over 100 years. Since then, the UK banking sector has continued to see an unprecedented number of new entrants, each challenging the traditional banking status quo with new and innovative business models, product offerings and technology.

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Posted on 10/07/2018 | 0 Comments

The European Banking Authority (EBA)’s Opinion on preparations for the withdrawal of the UK from the EU

European Banking Authority

The EBA published on 25 June a second Opinion on preparations for Brexit, a follow-up to its Opinion of October 2017. This Opinion is relevant to UK financial institutions (banks, investment firms, payment service providers, electronic money institutions and creditors and credit intermediaries, collectively “firms”) that provide services to the EU27 (whether directly or by establishment) and also to EU27 firms with counterparties, clients or customers based in the UK (whether directly or by establishment).

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Posted on 28/06/2018 | 0 Comments

Making banks resolvable by 2022 | the Bank of England sets a new course

Banking

A decade on since the start of the financial crisis, the Bank of England (BoE) has signalled a step up in efforts to make banks resolvable. The overall message is clear – despite the progress made so far, and the January 2019 deadline for UK retail ring-fencing being just around the corner, more work is needed. There is going to be no let-up for banks. It is not just more of the same; there are new requirements for banks to tackle, which may necessitate new skills and governance arrangements within their resolution teams, and with deadlines over the next four years already set.

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Posted on 25/06/2018 | 0 Comments

Cryptocurrencies and ICOs: challenging the regulatory perimeter

Crypto

“The prices of many cryptocurrencies have exhibited the classic hallmarks of bubbles including new paradigm justifications, broadening retail enthusiasm and extrapolative price expectations reliant in part on finding the greater fool.” Mark Carney, March 2018.

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Posted on 20/06/2018 | 0 Comments

Cyber resilience and the European Central Bank

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What new expectations for FMIs mean for the banking sector

The European Central Bank’s (ECB) recent consultation on its Cyber Resilience Oversight Expectations (CROE) for Financial Market Infrastructures (FMIs) and the release of its framework for an EU-wide Threat Intelligence-based Ethical Red Teaming exercise (TIBER-EU) follows a significant amount of work by the ECB in the last four years to scale-up its involvement in the supervision of cyber resilience for both FMIs and banks.

While these new expectations are of most immediate significance to FMIs, the ECB’s approach in the CROE should be read carefully by the banking sector as an indication of what might be coming its way from the ECB and other authorities.

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Posted on 30/05/2018 | 0 Comments

Innovation and data privacy: the ICO’s technology strategy 2018-21

Innovation

New technologies and evolving business models have required regulators to review their capabilities and respond to new risks posed. And the UK Information Commissioner’s Office (ICO) is no exception. The new General Data Protection Regulation (GDPR) has vested considerable powers to the ICO to regulate and supervise data privacy risks. Increasing concerns about the wholesale use and processing of personal data by firms are reflected in the ICO's recently published Technology Strategy, which outlines its objectives and focus areas through eight technology goals.

The ICO strategy’s leitmotif is that technological advances “need not come at the expense of data protection and privacy rights” and that “privacy and innovation are not mutually exclusive”. Through the development of its technology strategy, the ICO’s overall aim is to remain relevant by ensuring that the monitoring and understanding of technological change, and its impact on information rights, are a core component of its work going forward.

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Posted on 10/05/2018 | 0 Comments

Open-Source or Proprietary Software for Credit Risk: It’s all about asking the right questions

Open source

It is no secret that technology and its impact on companies’ business models is shaking up the general market. Technology disruption isn’t limited to media, retail, or transport (to name a few industries), but this disruption is widespread, also impacting financial services. The general theme is that technology enabled companies can execute quicker, cheaper and with greater precision.

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Posted on 25/04/2018 | 0 Comments

PRA Business Plan 2018/19

Swirl

The PRA published its Business Plan for 2018/2019 on 9 April 2018. The Business Plan, structured around the PRA’s eight core strategic goals, is cross-sectoral, outlining the work the PRA intends to undertake for the upcoming year across both banking and insurance sectors.

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Posted on 17/04/2018 | 0 Comments