Aiming at resolvability

Resolvability in the Eurozone

Global systemically important banks (G-SIBs) have been engaged in resolution planning for several years, but the implementation of the EU’s Bank Recovery and Resolution Directive extends this responsibility to a much wider set of institutions, many of which will be less familiar with the theory and practice of resolution planning. The SRB will be responsible for overseeing the process for the Banking Union area, with direct responsibility for around 150 of the largest cross-border banking groups.

Resolvability may have a significant influence on banks’ operating models across a number of dimensions, and banks will want to maintain the initiative in order to adjust their operations on their own terms.

Key messages

• The SRB will be responsible for resolvability assessments and will be empowered to mandate changes to banks’ legal entity, financial and operating structures to improve resolvability
• Banks should think about their governance structures, legal entity structures, the suitability of their liability structures for bail-in, their data capabilities, booking practices, and more.
• 2016 is likely to be about bringing all Banking Union countries “up to speed”, rather than immediately mandating changes to structures.
• Banks can take action in the near-term to retain the initiative by developing an understanding of their own resolvability, in order to adjust their operations on their own terms rather than those imposed by the authorities.