In October 2015, the PRA published Consultation Paper 38/15: Ensuring operational continuity in resolution (CP38/15). In CP38/15 the PRA set out a proposed framework to require firms to ensure continuity of critical shared services to facilitate recovery action, resolution or post resolution restructuring.
However, the PRA did not define an exact scope of application in CP38/15 pending an assessment of which firms should ensure continuity of critical economic functions. This assessment was also required for the calibration of the minimum requirement for own funds and eligible liabilities (MREL) by the Bank of England (the Bank) as resolution authority.
The PRA has now published an addendum to CP38/15 to clarify the scope of application. The addendum has been published on the same day as the Bank’s consultation on its approach setting MREL. While the addendum and the Bank’s consultation are intended to capture broadly the same firms, the exact thresholds proposed differ due to the legal bases of the two proposals. The PRA is proposing rules of general application and proposed financial metrics, based on data available in regulatory returns, to define the scope of its rules. By contrast, the Bank will be exercising its powers to set MREL, based on a firm-specific judgement of the appropriate resolution strategy, as required under the Bank Recovery and Resolution Directive.
The consultation period for CP38/15 and the addendum closes on 11 March 2016. The PRA plans to publish a Policy Statement with feedback, finalised rules and a Supervisory Statement in mid-2016. The PRA intends the final rules to apply from 1 January 2019.
View Ensuring operational continuity in resolution – CP38/15 update, 11 December 2015