The FSA has published ‘Recovery and Resolution Plans’ (RRP) – CP11/16 – which will be of interest to banks, large investment firms and firms subject to either or both CASS 6 (Custody rules) and CASS 7 (Client money rules).
UK incorporated deposit takers and BIPRU 730k firms with assets exceeding £15bn will need to prepare and keep up-to-date ‘recovery plans’ and ‘resolution packs’. The former will need to identify options to recover financial strength and viability should a firm come under severe stress, whilst the latter will contain detailed information about the business and operational structure.
Recovery plans will be considered by the FSA (‘.. the FSA may ask the firm to send its recovery plan to the FSA at any time’). In contrast the FSA will consult with the Bank of England and the Treasury on whether a firm’s resolution pack is satisfactory.
RRPs will need to be reviewed annually and updated on an ongoing basis to reflect any material developments in a firm’s business which affects its RRP.
The FSA has also produced guidance to assist firms with their RRPs.
Firms subject to CASS 6 and /or CASS 7, regardless of whether they are required to produce an RRP, will need to draw up a CASS resolution pack.
The purpose of such a pack is to ensure that a firm maintains information that would, in the event of an insolvency, assist an insolvency practitioner in achieving a timely return of client money and safe custody assets to the firm’s clients (each document in the pack should be retrievable within 48 hours). Firms will be subject to annual reportingto the FSA, by 31 January each year, concerning compliance with the rules. Further details on the CASS resolution pack and content can be found in Annex 4 of CP11/16.
The rules concerning RRPs will be in FINMAR 4whilst those concerning CASS resolution packswill be found in CASS 10.
Comments are invited by 9 November with certain provisions coming into effect in Q1 2012 but with transitional provisions allowing firms until June 2012 to prepare their RRPs.
