The Bank Recovery and Resolution ( No. 2) Order 2014

Articles 60(2)(a) and 62(3)(a)

[F1 SCHEDULE 2B U.K. Matters that the Bank is to consider when assessing resolvability

Textual Amendments

F1 Sch. 2B inserted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 119; 2020 c. 1, Sch. 5 para. 1(1)

1.   In this Schedule— U.K.

(a) “back-to-back transaction” means a transaction entered into between two group entities for the purpose of transferring, in whole or in part, the risk generated by another transaction entered into between one of those group entities and a third party;

(b) “entity” means, in relation to an assessment of resolvability of—

(i) an institution in accordance with article 60(2)(a), the institution;

(ii) a relevant group in accordance with article 62(3)(a), the group entities;

(c) “intra-group guarantee” means a contract by which one group entity guarantees the obligations of another group entity to a third party.

2.   The matters referred to in articles 60(2)(a) and 62(3)(a) are— U.K.

(a) the extent to which the entity is able to map core business lines and critical operations to legal persons;

(b) the extent to which legal and corporate structures are aligned with core business lines and critical operations;

(c) the extent to which there are arrangements in place to provide for essential staff, infrastructure, funding, liquidity and capital to support and maintain the core business lines and the critical operations;

(d) the extent to which the service agreements that the entity maintains are fully enforceable in the event of resolution of the entity;

(e) the extent to which the governance structure of the entity is adequate for managing and ensuring compliance with the entity's internal policies with respect to its service level agreements;

(f) the extent to which the entity has a process for the transition of the services provided under service level agreements to third parties in the event of the separation of critical functions or of core business lines;

(g) the extent to which there are contingency plans and measures in place to ensure continuity in access to payment and settlement systems;

(h) the adequacy of the management information systems in ensuring that the Bank is able to gather accurate and complete information regarding the core business lines and critical operations so as to facilitate rapid decision making;

(i) the capacity of the management information systems to provide the information essential for the effective resolution of the entity at all times even under rapidly changing conditions;

(j) the extent to which the entity has tested its management information systems under stress scenarios as defined by the Bank;

(k) the extent to which the entity can ensure the continuity of its management information systems both for the affected entity and the new entity in the case that the critical operations and core business lines are separated from the rest of the operations and business lines;

(l) the extent to which the entity has established adequate processes to ensure that it provides the Bank with the information necessary to identify depositors and the amounts covered by the Financial Services Compensation Scheme established under Part 15 of FSMA in respect of deposits;

(m) where the entity uses intra-group guarantees, the extent to which those guarantees are provided at market conditions and the risk management systems concerning those guarantees are robust;

(n) where the entity engages in back-to-back transactions, the extent to which those transactions are performed at market conditions and the risk management systems concerning those transactions practices are robust;

(o) the extent to which the use of intra-group guarantees or back-to-back booking transactions increases contagion across the group;

(p) the extent to which the legal structure of the group inhibits the application of the resolution tools as a result of the number of legal persons, the complexity of the group structure or the difficulty in aligning business lines to group entities;

(q) the amount and type of eligible liabilities of the entity;

(r) where the assessment involves a mixed activity holding company, the extent to which the resolution of group entities that are institutions or financial institutions could have a negative impact on the non-financial part of the group;

(s) the existence and robustness of service level agreements;

(t) whether authorities in third countries have the resolution tools necessary to support resolution actions by the Bank, and the scope for coordinated action between the Bank and authorities in third countries.

(u) the feasibility of using resolution tools in such a way which meets the resolution objectives, given the resolution tools available and the entity's structure;

(v) the extent to which the group structure allows the Bank to resolve the whole group or one or more of its group entities without causing a significant direct or indirect adverse effect on the financial system, market confidence or the economy and with a view to maximising the value or the group as a whole;

(w) the arrangements and means through which resolution could be facilitated in the case of groups that have subsidiaries established in different jurisdictions;

(x) the credibility of using resolution tools in such a way which meets the resolution objectives, given possible impacts on creditors, counterparties, customers and employees and possible actions that authorities in third countries may take;

(y) the extent to which the impact of the entity's resolution on the financial system and on confidence in financial markets can be adequately evaluated;

(z) the extent to which the resolution of the entity could have a significant direct or indirect adverse effect on the financial system, market confidence or the economy;

(aa) the extent to which contagion to other institutions or to the financial markets could be contained through the application of the resolution tools and powers; and

(bb) the extent to which the resolution of the entity could have a significant effect on the operation of payment and settlement systems.]