On 24 July 2023, the Bank of England (BoE) published a letter from its Head of International Resolvability, Christopher Jackson, and Head of Domestic Resolvability, Robert Zammit, to Chief Financial Officers (CFOs) of the major UK banks ahead of the second Resolvability Assessment Framework (RAF) assessment.

Following a previous letter sent to CFOs on 7 March 2023, this most recent letter sets out further information on the second RAF assessment, which is due to begin on 6 October 2023 with the submission of firms’ Resolution Assessment reports. It is intended to support firms’ planning and ongoing work to maintain and enhance their resolvability.

The letter notes that resolvability remains a key priority for the BoE and the Prudential Regulation Authority, particularly in light of recent market events. As such, firms are reminded to continue to take responsibility for their resolvability, ensuring that their preparations remain live and tested, to help the UK’s resolution regime to remain fit and ready at all times.

The BoE reminds firms that it will repeat its resolvability assessment of the major UK firms in 2023-24, using Resolution Assessment reports to conduct activities that evaluate firms’ work to address issues identified as part of the first assessment. It will also monitor progress in maintaining and enhancing their ability to achieve the three resolvability outcomes:

  • Having adequate financial resources in the context of resolution.
  • Being able to continue to do business through resolution and restructuring.
  • Co-ordinating and communicating effectively internally and with the authorities and markets so that resolution and subsequent restructuring are orderly.

The letter notes the significant importance placed by the BoE on firms’ ability to achieve all three resolvability outcomes on a continuing basis, and that resolvability is fully embedded into firms’ assurance arrangements. The BoE will assess firms’ own assurance over their resolvability, building on the first RAF assessment, and it may update, modify or change its overall assessment depending on the information obtained and on individual firm circumstances.

In the second RAF assessment, the BoE plans to:

  • Undertake a more detailed assessment of firms’ preparations for resolution, with a focus in 2023-24 on the Adequate Financial Resources (AFR) outcome.
  • Focus on firms’ capabilities to support a resolution transaction and remove the MREL, Valuations, and Funding in Resolution barriers to resolution.
  • Assess firms’ provision of timely data and the flexibility and readiness to execute their capabilities.
  • Be proportionate in how it assesses firms’ ability to achieve the AFR outcome, and is likely to focus on specific issues and capabilities, including whether systems and processes can provide suitable outputs in a timely fashion.

The BoE plans to continue engaging with firms ahead of and during the second RAF assessment, including engagement on the BoE’s public statement and on issues identified by it as part of the first assessment and business as usual work.