The Bank Recovery and Resolution (No. 2) Order 2014

CHAPTER 2U.K.Assessment of group recovery plan where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 2U.K.

16.—(1) This Chapter applies where, in relation to a relevant group—

(a)the PRA or FCA is the consolidating supervisor; and

(b)a group entity submits a group recovery plan to the appropriate regulator for assessment F1....

(2) In this Chapter—

“business changes” means changes to the business of a group institution which would be made with the object of addressing an impediment;

“four month period” means four months beginning with the date on which the appropriate regulator transmits a copy of the group recovery plan under article 17;

“group institution” means—

(a)

the [F2UK] parent undertaking, if it is an institution;

(b)

a group subsidiary which is an institution;

“impediment”, in relation to the group recovery plan, means any material deficiency or measure in the plan which would impede its implementation;

“relevant matters”, in relation to the assessment of the group recovery plan, means the following matters for decision—

(c)

whether the plan meets the criteria for assessment;

(d)

whether group institutions should be required to draw up and submit recovery plans on an individual basis;

(e)

whether the plan contains an impediment;

(f)

whether a group entity should be required to revise the plan;

(g)

whether an impediment has been adequately addressed in a revision of the plan;

(h)

where an impediment has not been adequately addressed in a revision of the plan, whether it can be adequately addressed by directing a group entity to make specific changes to the plan; and

(i)

where an impediment cannot be adequately addressed by specific changes to the plan or by business changes—

(i)

whether a group entity should be directed to take relevant measures; and

(ii)

the terms of any direction to take relevant measures;

“relevant measures” means measures to maintain or restore the viability and financial position of a group institution, including measures to—

(a)

reduce the institution's risk profile, including its liquidity risk profile;

(b)

review its structure and strategy;

(c)

enable it to undertake timely recapitalisation;

(d)

change its funding strategy in order to improve the resilience of core business lines and critical functions; or

(e)

change its governance structure; and

F3...

Textual Amendments

Duty to transmit a copy of group recovery planU.K.

17.—(1) The appropriate regulator must send a copy of the group recovery plan or, where paragraph (2) has effect in relation to any information, of the plan without that information, to—

(a)the Bank; [F4and]

F5(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F6(d)the PRA or FCA, where either is not the appropriate regulator but supervises a group entity as an authorised person under FSMA.]

F7(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) This article does not require any information contained in the group recovery plan to be disclosed if its disclosure would be contrary to section 348 of FSMA M1 (restrictions on disclosure of confidential information by FCA, PRA etc).

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Marginal Citations

M1Section 348 was amended by the Financial Services Act 2010 (c. 28), section 24(1) and (2) and Schedule 2, paragraphs 1 and 26; by the Financial Services Act 2012, section 41 and Schedule 12, paragraph 18, and by the Financial Services (Banking Reform) Act 2013, section 129 and Schedule 8, paragraph 5.

Assessment of group recovery planU.K.

18.—(1) F8... The appropriate regulator must assess the group recovery plan, and is solely responsible for the assessment.

F9(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The assessment must take account of—

(a)any recommendations made by the Bank F10... to address any course of action proposed in the plan which could have an adverse impact on the resolvability of a group institution; and

(b)the potential impact of the proposed recovery measures on the financial stability of [F11the United Kingdom].

Textual Amendments

Purpose of assessmentU.K.

19.—(1) The purpose of the assessment of the group recovery plan is to determine whether the plan meets the criteria for assessment and decide other relevant matters.

(2) The criteria for assessment are that the plan must satisfy the requirements of [F12Schedule A1] and that the arrangements proposed in the plan—

(a)would, if implemented, be reasonably likely to maintain or restore the viability and financial position of group institutions; and

(b)would be reasonably likely to be implemented quickly and effectively in situations of financial stress and, as far as possible, without any material adverse impact on the financial system of [F13the United Kingdom].

[F14(2A) The PRA and the FCA may each make technical standards relating to the criteria referred to in paragraph (1) for a group recovery plan submitted by a group entity that it has authorised.]

(3) The appropriate regulator must ensure that the group recovery plan is not assessed without consideration of—

(a)any preparatory measures taken or planned to be taken by any group entity;

(b)the possibility that the plan may have to be implemented at the same time as other group recovery plans and recovery plans drawn up by institutions; and

(c)whether the capital and funding structure of the group institutions is appropriate having regard to the level of complexity of their organisational structure and risk profile.

(4) This article has effect subject to the imposition of any simplified obligations (within the meaning given by article 9(3)(a)) with respect to the group recovery plan.

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[F15Timing of assessment of planU.K.

20.  The appropriate regulator must conclude the assessment within the four month period.]

Textual Amendments

Joint assessment of planU.K.

F1621.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Revision of planU.K.

22.  The appropriate regulator—

(a)must notify a UK [F17parent undertaking] if the group recovery plan is found on assessment to contain an impediment; and

(b)may not require a UK [F17parent undertaking] to revise the plan without giving it an opportunity to state its opinion on that requirement.

(2) If the appropriate regulator requires a UK [F18parent undertaking] to revise the plan, it must allow [F19the undertaking] two months, which it may on application by [F19the undertaking] extend to three months, to prepare a plan which demonstrates that the impediment has been addressed.

Textual Amendments

Business changes and relevant measuresU.K.

23.—(1) This article applies where—

(a)a UK [F20parent undertaking] fails to submit a revision of the group recovery plan within the time allowed by the appropriate regulator; or

(b)the appropriate regulator considers that an impediment has not been adequately addressed in a revision of the plan and cannot be adequately addressed by directing [F21the UK parent undertaking] to make specific changes to the plan.

(2) F22... the appropriate regulator must, in exercise of its powers under FSMA—

(a)direct the UK [F23parent undertaking] to propose business changes; and

(b)if [F24the UK parent undertaking] fails to propose business changes within the time allowed by the appropriate regulator or the appropriate regulator considers that any business changes proposed by [F24the UK parent undertaking] would not adequately address the impediment, determine whether to direct [F24the UK parent undertaking] to take relevant measures.

Textual Amendments

Recovery plan for group institutionU.K.

24.  Where the appropriate regulator requires a group institution to draw up and submit a recovery plan on an individual basis, Chapter 1 applies for the purpose of the assessment of the plan, but has effect for that purpose as if each reference to an institution were a reference to the group institution.

References to EBAU.K.

F2525.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Requesting the assistance of EBAU.K.

F2626.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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