Contributions to Resolution Planning

Avantage Reply assisted the client in preparing technical notes for the Single Resolution Board in the context of the elaboration of its first resolution plan.

THE CLIENT

The client is a cross-border bank classified as Significant Institution and as such under the direct responsibility of the ECB/SSM and the SRB. Its business activities span private banking, asset management and investment banking across various European countries.

THE CHALLENGE

In the context of the preparation of its first resolution plan, the Single Resolution Board (‘SRB’) requested the bank to provide input on several topics in the form of templates and technical notes. Areas of focus entailed the following items:

• Strategic analysis of the bank, in particular whether it exercised functions considered critical to the market and the extent of interconnectedness;
• Determination of the preferred resolution strategy, in particular a self-assessment of the circumstances and modalities of the bank’s failure and of the potential impact on clients and financial stability; and
• Information and Communication Plan, in particular a self-assessment of the bank of its capacity of the bank to support the resolution authority, when it needs to intervene.

Reply was hired to assist the bank in addressing those requests in an efficient and timely manner. Challenges associated to this exercise relate to the complexity of the issues under consideration, their multi-disciplinary nature and their contrast with prudential requests arising from the supervisory side.

APPROACH AND SOLUTION

Reply consultants took on the role of coordination between the various departments contributing to the exercise (incl. risk, finance, legal, compliance, business). Following a stock take of the requests of the SRB, gaps were identified compared to existing documentation and processes (notably the recovery plan). Workshops were organised to increase awareness of the resolution framework and gather inputs tailored to resolution planning. Additionally, the necessary alignment between those and the bank’s recovery plan were identified so as to ensure consistency between resolution and recovery planning.

RESULTS AND BENEFITS

By the end of the project, the technical notes were successfully delivered to the Single Resolution Board. Beyond compliance, this exercise was an opportunity for the bank to familiarise itself further with the resolution framework and increase awareness throughout the organisation. Supportive of sound risk management, it also reveals areas of improvement in recovery planning.

Above all, it must be noted that, while the resolution authority remains responsible for drafting the resolution plan, a significant involvement of the bank in the planning process is key to credibly support its position, notably on strategic matters.