Recovery and Resolution: Resolution

As we know, the Bank of England (BoE) will be the Resolution Authority for the UK – see ‘Recovery and Resolution’ article in Regulatory Roundup 58 – albeit that the FCA (and PRA where relevant), in addition to collating firms’ recovery plans, will collect the required information from firms on behalf of the BoE.

The FCA published CP14/15 in August which also contained the draft rules. The paper concentrated on the ‘recovery’ aspect rather than the ‘resolution’.

The BoE has now published its approach to ‘resolution’ of a failed bank, building society or relevant investment firm (IFPRU 730K firm).

The three key stages of resolution which a firm would go through are:

  • Stabilisation phase (which may include a transfer of some of the business to a third party);
  • Restructuring phase (which will address the causes of failure and will attempt to restore confidence); and
  • Exit (which ends the involvement of the BoE: the firm will either cease to exist or will no longer require support)