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

CHAPTER 5 Removal of impediments to resolvability of groups where neither the PRA nor the FCA is the consolidating supervisor

Application and interpretation of Chapter 5

75.—(1) This Chapter applies where, in relation to a relevant group—

(a) neither the PRA nor the FCA is the consolidating supervisor; and

(b) the Bank, having made an assessment of group resolvability in accordance with Chapter 2 jointly with the group-level resolution authority and other resolution authorities for group entities, has identified substantive impediments to the resolvability of a group entity (“the impediments”).

(2) In this Chapter—

“group entity” and “measures for structural change” have the same meaning for the relevant group as they have for a relevant group in Chapter 4;

“the plan” means the group resolution plan being drawn up for the relevant group (or the group resolution plan which has been adopted for the group and is being reviewed);

“pre-resolution powers” has the same meaning as in Chapter 3;

“remedial measures” means measures to address or remove the impediments; and

“report on impediments and remedial measures” means a report prepared by the group-level resolution authority which—

(a)

contains an analysis of the impediments;

(b)

proposes remedial measures for the impediments; and

(c)

examines the impact of the remedial measures on the business of the group entities.

Suspension of requirement to draw up or review group resolution plan

76.—(1) The receipt by the Bank of a report on impediments and remedial measures has the effect of suspending the Bank’s duty to endeavour to reach a decision, jointly with other resolution authorities, on the adoption or review of the plan.

(2) That duty is revived when a joint decision is reached on the determination of remedial measures.

Determining remedial measures

77.—(1) This article applies where the Bank has received from the group-level resolution authority—

(a) any observations submitted by the EEA parent undertaking on the report on impediments and remedial measures; or

(b) a proposal by that undertaking to take alternative remedial measures (“alternative proposal”).

(2) The Bank must endeavour within the college, jointly with the group-level resolution authority and other resolution authorities for group entities, to—

(a) confirm the impediments with or without modification;

(b) assess any alternative proposal; and

(c) determine remedial measures—

(i) where the resolution authorities conclude within the college that the measures set out in an alternative proposal would adequately address or effectively remove the impediments, by approving that proposal (with or without modification);

(ii) otherwise, by joint decision to specify the measures which are to be taken.

(3) In considering any matter referred to in paragraph (2) the Bank must take account of—

(a) the threat to financial stability posed by the impediments; and

(b) the effect of remedial measures determined by joint decision on—

(i) the business and financial stability of each group entity and its ability to contribute to the economy of the United Kingdom and other EEA States;

(ii) the EEA market for financial services;

(iii) the financial stability of any EEA State or of the EEA as a whole.

(4) Paragraphs (5) and (6) apply where remedial measures determined under paragraph (2) are to be implemented by a group entity set up in the United Kingdom.

(5) The Bank must exercise pre-resolution powers with the object of requiring the entity to take the remedial measures.

(6) In a direction given for that purpose, the Bank—

(a) if it has specified the measures which are to be taken, must demonstrate how the measures set out in an alternative proposal would not adequately address or effectively remove the impediments;

(b) must demonstrate how the remedial measures will adequately address or effectively remove the impediments in a manner proportionate to the burden or restriction imposed by the direction; and

(c) must require the entity to—

(i) prepare a plan showing how it will comply with the remedial measures; and

(ii) submit that plan within one month beginning on the date of the direction.

Joint decision on impediments to group resolvability and remedial measures

78.  The Bank must endeavour to reach a joint decision on the matters referred to in article 77(2) within four months beginning with the date on which—

(a) the EEA parent undertaking submits observations on the report on impediments and remedial measures or an alternative proposal; or

(b) if the EEA parent undertaking does not submit observations or an alternative proposal within four months beginning with the date on which it receives the report, the date on which it ceases to be entitled to do so.

Failure to reach joint decision: disagreement by the Bank with joint proposals

79.—(1) This article applies where—

(a) a joint decision on the matters referred to in article 77(2) cannot be reached within the period referred to in article 78 (“the period for joint decision”); and

(b) the Bank disagrees with the group-level resolution authority about any of those matters.

(2) The Bank must exercise pre-resolution powers with the object of requiring any entity for which it is the resolution authority to take specified measures (“the measures”) to address or remove the impediments so far as they concern that entity.

(3) In a direction given by the Bank for that purpose the Bank must—

(a) demonstrate how the measures will adequately address or effectively remove the impediments in a manner proportionate to the burden or restriction imposed by the direction; and

(b) require the entity to—

(i) prepare a plan showing how it will comply with the measures; and

(ii) submit that plan within one month beginning on the date of the direction.

(4) The Bank must consult the appropriate regulator and, where appropriate, the Financial Policy Committee before determining the measures.

(5) For the purpose of determining the measures the Bank must take account of—

(a) the threat to financial stability posed by the impediments; and

(b) the effect of the measures on—

(i) the business and financial stability of the entity and its ability to contribute to the economy of the United Kingdom and other EEA States;

(ii) the EEA market for financial services;

(iii) the financial stability of any EEA State or of the EEA as a whole.

(6) The Bank must give the entity written notice of the measures, including a reasoned account of its decision to require the entity to take the measures.

Failure to reach joint decision: agreement by the Bank with joint proposals

80.—(1) This article applies where—

(a) a joint decision on the matters referred to in article 77(2) (“relevant matters”) cannot be reached within the period for joint decision; and

(b) the Bank agrees with the group-level resolution authority about those matters.

(2) The Bank must either—

(a) jointly with other resolution authorities decide relevant matters for part of the relevant group; or

(b) notify the group-level resolution authority that it does not wish to reach a joint decision on relevant matters for part of the relevant group.

(3) If the Bank gives notice under paragraph (2)(b), it must determine measures to address or remove the impediments so far as they concern any group entity for which it is the resolution authority in accordance with article 79 (as if it disagreed with the group-level resolution authority about relevant matters).

References to EBA

81.—(1) Where, before the end of the period for joint decision, another resolution authority has referred to EBA in accordance with Article 19 of the EBA Regulation any matter relating to prospective remedial measures which consist of, or include, measures for structural change in respect of a group entity for which the Bank is the resolution authority, the Bank must—

(a) defer its decision on the matter referred for one month beginning with the date on which the period for joint decision ends; and

(b) ensure that the decision conforms with any decision taken by EBA before the end of that month under Article 19.3 of the EBA Regulation.

(2) The Bank may, within the period for joint decision, refer to EBA in accordance with Article 19 of the EBA Regulation any matter relating to remedial measures which—

(a) are proposed by the group-level resolution authority or any other resolution authority for a group entity; and

(b) consist of, or include, measures for structural change.

(3) For the purposes of a reference to EBA of a matter to which this article refers the period for joint decision is deemed to be the conciliation phase referred to in Article 19.2 of the EBA Regulation.

Requesting the assistance of EBA

82.  The Bank may ask EBA to assist the resolution authorities in accordance with Article 31(c) of the EBA Regulation to reach a joint decision on the matters referred to in article 77(2).