The SRB publishes today guidance on solvent wind-down of derivatives and trading books in resolution, in line with its Expectations for Banks document, published in April 2020.
For certain banks, the size and
complexity of their trading books could impede the credible and feasible
implementation of their resolution strategies. Solvent wind-down is an
approach that can be used for exiting trading activities in an orderly
manner and avoiding posing risks to financial stability. The lack of a
credible SWD plan could jeopardise the credibility and feasibility of the resolution strategy of any bank with material trading books.
The guidance was developed following
work at Financial Stability Board level, surveys, a pilot exercise and
consultation with G-SIBs. It applies to all banks with material trading
books.
“Today’s document is about putting meat
on the bones of existing SRB principles, giving more detail to banks on
how to demonstrate resolvability in relation to structure, complexity
and interdependencies of their trading books. It is yet another small,
but important step on the road to resolvability.” – Elke König, SRB
Chair.
Today’s guidance sets out the scope and
minimum expectations for SWD planning and potential execution, with the
main objectives to:
- adequately prepare, develop and maintain banks’ capabilities for the planning of a SWD in resolution, and
- to ensure execution capabilities of the SWD plan in a reasonable timeframe.
The application of this SWD guidance is
specific to each bank and it may be adapted to individual situations in
a proportionate manner.
SRB
© Single Resolution Board
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