Prudential Regulation Authority Rulebook

1.

This supervisory statement sets out details on information that firms should submit to the Prudential Regulation Authority (PRA) to facilitate resolution planning.

2.

This statement is aimed at UK banks, building societies, PRA designated investment firms and qualifying parent undertakings (‘firms’) to which the Resolution Pack Part of the PRA Rulebook applies.

3.

The PRA aims to minimise the adverse impact on the financial system of firms failing by ensuring that they can be resolved in an orderly fashion. To achieve this, PRA rules require firms to submit resolution packs containing information to enable the authorities to prepare for orderly resolution. The information submitted in resolution packs will allow the authorities to identify the appropriate resolution strategy for a firm; work with firms to identify barriers to an optimal resolution plan; and develop the remedial actions for the removal of barriers.

4.

This supervisory statement has been informed by PRA and Bank of England experience of resolution planning following the publication of CP11/16 and FS12/1 and by the Financial Stability Board’s (FSB’s) guidance on resolution strategies. The development of resolution plans has advanced significantly since 2011 and the PRA’s revised approach is based on targeted information requests which are designed to be proportionate to the size and complexity of the firm.

5.

Firms are expected to use this supervisory statement to inform the nature and scope of information they submit to the PRA.

6.

Information on resolution planning will be requested from firms in two main phases, Phase 1 and Phase 2, with ad hoc contingent information requests if required. These phases are outlined below, and the chapters of the supervisory statement provide more detail on each type of request.

7.

Phase 1: This phase outlines baseline information needed to establish a resolution strategy. Phase 1 information should be submitted by all firms.

8.

Chapter 2 sets out the two parts of Phase 1, A and B, and the associated information requests in more detail. Part A of Phase 1 requests information relating to group structure, significant legal entities and the firm’s business model. This will enable the authorities to identify the most appropriate resolution strategy for the individual firm.

9.

Part B of Phase 1 requests information on firms’ economic functions. This will enable authorities to identify those functions which are critical to the financial system and which will need to be protected in resolution and retained in post-resolution restructuring.

10.

In some areas the PRA asks for information that is similar to information collected by the PRA in other regulatory reporting submissions. However, these requests typically ask for information at a different level of detail needed to meet the authorities’ needs for resolution planning. While the PRA recognises that submission of duplicative, or similar, information will be a cost to firms, the PRA does not consider this to be unreasonably burdensome. The benefit to the authorities of having all resolution information submitted and stored in one place is significant. First, it will allow the authorities to maintain appropriate and up-to-date resolution plans. Second, it will allow timely access to information during contingency planning.

11.

Phase 2: This phase outlines the detailed information needed to support the authorities’ preferred resolution strategy while ensuring that critical economic functions are maintained. This section of the supervisory statement is designed to be tailored to individual firms. For example, large, interconnected firms with many complex business lines may be asked to provide information relating to use of the bail-in tool and payments services but they are less likely to be asked to provide information related to the Bank Insolvency Procedure. Small deposit-taking firms may well be asked for information related to the Bank Insolvency Procedure. Firms may be required to submit information relating to more than one resolution strategy in order to assess feasibility across a range of possible options.

12.

The information requested in Phase 2 may reflect work which is ongoing with the firm. Before making a submission as part of Phase 2, firms should discuss this with supervisors.

13.

Contingent information: The PRA may request additional information if a firm is experiencing stress and approaching possible resolution. Firms are expected to be able to provide this information at short notice. More detail on such requests is set out in Chapter 3.

14.

All firms are required to submit Phase 1 information. The PRA will request resubmission on a regular cycle of every two years^[1] or following a material change to the firm’s structure or business activities. The PRA requires all firms to have made their first submission of Phase 1 information within fifteen months of publication of this statement. Supervisors of individual firms will specify the deadline for submission of Phase 1 information within that time frame.

15.

The PRA will review Phase 1 submissions and, in conjunction with the Bank of England, will determine a preferred resolution strategy for the firm. This will define the information that should be requested in Phase 2. Supervisory judgement will inform the breadth and depth of the information firms will be requested to provide in Phase 2 and, where possible, this will be integrated with other scheduled supervisory initiatives (eg business model analysis reviews, liquidity reviews, operational risk reviews) in order to avoid duplication of effort. The PRA expects firms that are, or are likely to be, subject to external or internal MREL in excess of regulatory capital requirements to provide information on MREL resources as specified in Chapter 2 section A4 of this statement. Given the diversity of legal, financial and operational structures across firms, firms may be required to provide information beyond that which is outlined in this supervisory statement. The PRA will notify firms where updates are required to Phase 2 information. As firms move closer to resolution the PRA may ask for data to be updated.