The FCA has published Consultation Paper 14/15: Recovery and Resolution Directive (CP14/15).
In CP14/15, the FCA sets out proposed changes to its Handbook that are required to transpose the Recovery and Resolution Directive (RRD) into the UK regulatory regime for investment firms and certain group entities that it regulates prudentially and that fall within the scope of the RRD.
The RRD must be transposed into national law by 31 December 2014 and applied from 1 January 2015.
CP14/15 has 6 substantive chapters being:
- chapter 2 containing requirements for recovery plans including determination of scope for general and simplified obligations;
- chapter 3 containing requirements and conditions for notification of failure or likely to fail;
- chapter 4 containing information requirements for resolution planning including baseline information, supplementary information and keeping information up-to-date;
- chapter 5 containing conditions for intra-group financial support agreements;
- chapter 6 covering contractual recognition that liabilities may be subject to bail-in; and
- chapter 7 covering early intervention triggers, record of financial contracts and minimum requirement for own funds and eligible liabilities.
The FCA is proposing an approach that simplifies some obligations in the areas of responsibility that will fall to it, where this is allowed by the RRD and where the FCA believes it to be proportionate and appropriate to do so, particularly in relation to smaller firms. The RRD allows this in terms of the content and details of recovery and resolution plans, and the frequency with which these should be updated. The FCA expects to take the opportunity to use ‘simplified obligations’ for all but its largest IFPRU 730k firms. This would amount to approximately 190 from the 230 firms in scope being subject to a simplified application of the obligations.
The FCA also notes that the RRD places obligations on certain group entities, including some unauthorised entities. Where these entities are authorised by the FCA it has sought to impose the obligations on the firms directly. However, where these entities are not FCA authorised but are UK subsidiaries of an IFPRU 730k firm, or a qualifying parent undertaking, the FCA proposes to require the FCA investment firm or qualifying parent undertaking to ensure that the entities in question comply with the obligation.
The deadline for comments on CP14/15 is 1 October 2014.
View CP14/15 Recovery and Resolution Directive, 1 August 2014