RAF blog_playbooks
Following finalisation of the Bank of England’s (BoE) Resolvability Assessment Framework (RAF), in-scope firms will need to consider how they implement the framework. In the first blog in this series on the RAF, we consider the benefits of robust implementation and taking a long-term, rather than ad-hoc, approach. In this blog, we look at master playbooks. While the RAF is silent on the topic, we believe that master playbooks can be a useful tool both for demonstrating resolvability and for determining an overall strategy and work programme for implementing the RAF.

Master playbook and sub-playbooks

In essence, resolution playbooks act as a manual to cover the actions needed in an actual resolution. They are supported by clear roles and responsibilities, and data and system capabilities to ensure the relevant individuals can implement the required actions. Playbooks are a heavy feature of resolution planning in some jurisdictions, such as US Title I resolution planning and are becoming an increasing area of focus for other major regulators. While the RAF does not discuss playbooks, we believe that they are beneficial for two reasons. First, they can help you establish and formalise the governance procedures and actions that will be taken during a resolution. Second, they are an efficient and effective means of demonstrating to the resolution authority that your arrangements are sound.

A key component of ensuring that resolution playbooks are cohesive and functional is the creation of a master playbook. The master playbook should provide a manageable and actionable structure to guide decision-making through recovery and resolution, taking account of interaction with the Board and between group and material legal entities. Detail can be relegated to sub-playbooks owned by responsible Executives. The overall structure of the master playbook and sub-playbooks allows a cohesive approach to recovery and resolution while also allowing some flexibility, so that sub-playbooks can be designed to meet a specific need.

The diagram below shows our view on the optimal structure of master playbooks and sub-playbooks.

Hierarchy of Playbooks

Master Playbook

Master playbooks and the RAF

We believe developing a clear, thoughtful approach to master playbooks can be a useful first step not just when thinking about playbooks and sub-playbooks, but also when planning the implementation of the RAF as a whole.

Focussing on master playbooks upfront can help engage senior management and the Board with RAF implementation and the firm’s wider recovery and resolution work programme. This engagement will help them better understand both how the various components of the resolvability agenda fit together and what their roles would be in a resolution scenario.

By taking an approach to master playbooks and sub-playbooks that follows a continuum from stress, to recovery, and finally to resolution, you will be able to leverage business as usual systems and processes. This approach will be more efficient and can help you avoid taking an expensive, piecemeal approach to implementation. It can also provide greater assurance to BoE that resolvability will be built and maintained.

In addition, master playbooks are a useful way to demonstrate to the BoE that the firm has thought through:

  • the decisions that need to be taken end-to-end from recovery through to resolution;
  • the information needed to support those decisions and how that will be sourced and modelled; and
  • where relevant, the unusual actions that might need to be taken (disposals, resolution valuations, bail-in, etc) and processes to execute them.

In practice, many firms have developed a plethora of documents without a clear purpose or overarching structure on top. Not only does this approach diminish the usefulness of playbooks, it can also undermine the firms’ ability to use playbooks to demonstrate that they meet the BoE’s expectations. By starting with the creation of a master playbook, you can ensure that your playbooks provide a coherent, effective structure and approach that would be invaluable in the event of a resolution scenario and supports in demonstrating resolvability to the resolution authority.

Alastair_Morley_110x100

Alastair Morley - Partner

Alastair specialises in the resolvability of banks and accompanying regulation and works with National Resolution Authorities and banks on resolution assessments, operational continuity projects as well as live contingency planning and valuation cases. Alastair is a leading member of our global team focusing on recovery and resolution and has been working actively in this area for over a decade, since the Icelandic banking collapse. He has led some of our largest projects in this area, working with Deloitte teams globally and representing Deloitte on industry groups and in discussions with regulators around the world on this topic.

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Andrew Gracie Left

Andrew Gracie – Special Adviser

Andrew Gracie is a Special Adviser with Deloitte. He helps support clients on their resolution preparedness, including recovery and resilience planning. Andrew joined from the Bank of England where he chaired the Financial Stability Board’s working group on resolution. During a career which has overseen vast regulatory change, he has been at the forefront of introducing new domestic and international resolvability standards.

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Alex Brown - Director

Alex has 16 years’ experience in prudential regulation. Prior to Deloitte, Alex spent 13 years in the regulator including leading the recovery and resolution team at the PRA and driving a lot of the initial thinking around the topic. He has worked as a consultant for the last 3 years and helped a wide range of clients with a variety of recovery and resolution challenges, along with capital, liquidity and broader prudential regulatory topics.

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Nikoletta Kle

Nikoletta Kleftouri - Manager

Nikoletta is a Manager within Deloitte’s Risk and Capital Management practice, and a qualified EU lawyer. She brings with her several years of regulatory experience, having previously worked as a Bank Expert in the European Banking Authority (EBA), Legal Counsel of the UK Prudential Regulation Authority (PRA) and Policy Analyst in the Bank of England. She holds a PhD, LLM and LLB, specialising in Banking Law.

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