Update

Single Resolution Board: the way forward for 2019

The SRB is responsible for the resolution of failing banks. It aims to minimise the effect of such a failure on the economy, the financial system and ultimately the taxpayer. The annual SRB work plan for 2019 was published on 12 November 2018.

The SRB have focused their priorities for 2019 around four key areas:

  • Strengthening resolvability of SRB banks and LSIs

Although, most banks have received confirmation of their MREL obligations, Minimum Requirements for own funds and Eligible Liabilities (MREL) decisions will continue to be made and communicated in 2019. In the 2019 cycle, the SRB expects to adopt more than 100 group-level MREL decisions, and to determine MREL targets for over 530 individual entities. In addition, the SRB intends to assess 49% of the resolution plans of Less Significant Institutions (LSIs).

  • Fostering a robust resolution framework

The SRB will issue a number of new policies in 2019 focused around areas such as: MREL determination, resolvability assessments, the operationalisation of resolution tools, separability assessment, firms’ operational continuity, liquidity and funding in resolution, resolution valuations and resolution reporting.

  • Preparing and carrying out effective crisis management

The SRB intend to simplify internal processes in order to increase efficiency. The implications for financial institutions are to enhance their data rooms in order to make themselves resolvable; an additional focus will be around the creation of a single source for depositary resolution-proof contracts (e.g.: Master Service Agreements, Service Level Agreements etc.).

  • Operationalising the Single Resolution Fund (SRF)

The SRF is expected to grow to about €32.7 billion in 2019 from x at end 2018 and it may be used as a last resort measure to ensure the effective application of resolution tools. The SRB intend to improve methodologies and IT tools for the calculation and collection of ex-ante contributions to the SRF, and to prepare for possible ex-post contributions. In addition, the SRF Investment plan will be updated with the addition of a new asset class. SRF contributions are payable by institutions by June each year.

 

Reporting to the SRB

Resolution reporting will play a key part in assessing financial institutions’ resolvability; the table below outlines the four required submissions for banks and Investment firms. One of the overarching principles to be maintained, while reporting to the different authorities (e.g: SSM, SRB and NCAs), is the safeguard of alignment between recovery and resolution planning. Institutions must ensure the accuracy of returns and that appropriate cross validations with other returns are in place. This year for the first time these submissions will require Director sign off prior to submission.

Liability Data Report (‘LDR’)

Critical Function Report

EBA Resolution Planning templates

Financial Market Infrastructure (FMI) template

Minor update to ease the XBRL transition, to support high quality and complete data, the LDR report should be submitted in line with the published LDR guidance with validation checks performed by the bank ensuring reconciliation with its FINREP and COREP regulatory reporting requirements.

The 2019 version is not available yet, however with the report institutions are required to perform a self-assessment when drawing-up recovery plans.

The final draft ITS amending the European Commission's Implementing Regulation (EU) No 680/2014 on supervisory reporting will be applicable for submissions of data as of December 2018.

As outlined by the EBA, first time, resolution reporting requirements are integrated in the EBA's single data point model, backed by validation rules and optional taxonomies.

The 2019 version will be made available by the SRB. However, the FMI report is meant to provide a reasonably detailed overview of banks’ participation in FMIs by virtue of providing a mix of qualitative and quantitative information to the SRB.

As result of this submission, institutions should consider alternative FMIs access should their current ones be unavailable in a resolution scenario.

Challenges for financial institutions:

  • data quality and reliability, especially regarding Cross-checks to be performed between different data sources to ensure reconciliation with regulatory reporting requirements;
  • alignment between Recovery & Resolution Planning;
  • multitude of internal and external stakeholders to manage; and
  • development of a defined set of procedures in order to effectively transition these reporting processes to a business as usual status.

How we can help

Grant Thornton Prudential risk  assists a diverse range of financial institutions in the interpretation and the completion of the resolution reporting requirements. Our teams have extensive knowledge of the Bank Recovery and Resolution Directive (‘BRRD’) in addition to a proven track record of assisting institutions with their data requirements.