Following a consultation paper released last August (see Regulatory Roundups 58, 59 and 60) the FCA published on 16 January PS 15/2 -“Recovery and Resolution Directive: Feedback on CP14/15 and final rules”.
The rules implement the Recovery and Resolution Directive (2014/59/EU) (‘RRD’) which has the aim of providing “measures, tools and powers in respect of preparing for the recovery of firms in financial difficulty, early intervention in the event of problems, and the resolution of failed firms in a way that reduces the costs to the public and mitigates the impact on the financial system”.
Under the RRD, the FCA (or the PRA for those firms that they regulate) is responsible for most of the recovery and early intervention aspects whilst the Bank of England, in its capacity as the Resolution Authority, will be responsible for the resolution of distressed firms.
Generally the RRD applies to an IFPRU 730k firm but can also include a BIPRU firm if it is part of a groupthat includes such a firm or a credit institution (‘RRD group’); firms should refer to IFPRU 11.1.6 which offers guidance on the application of the RRD.It is the view of the FCA that RRD is unclear as to whether it should also apply to an IFPRU 125k or an IFPRU 50k firm.For now they are not included but the FCA will continue to explore this with the Commission.
The FCA informs us that there are around 230 IFPRU 730k firms subject the RRD of which 190 are not ‘significant IFPRU firms’ (see IFPRU 1.2.3) and hence will be eligible for the ‘simplified obligations’ approach. Such firms will have to submit recovery plans every two years whereas significant IFPRU firms will be subject to annual submissions and with a greater level of detail (i.e. subject to the ‘general obligations’). Resolution plans, on the other hand, will be subject to a three year and two year reporting frequency respectively -although the Bank of England is the Resolution Authority, the FCA will be collecting resolution information on behalf of the Bank.
The new rules will be found in IFPRU 11, most of which apply from 19th January 2015 with the reporting for recovery plans being phased in from the end of June 2015 – IFPRU 11.6 comes into force on 1 January 2016. Reporting dates and frequency in respect of both recovery and resolution plans can be found in SUP 16.20.
