Resolvability testing (EBA consultation)
EBA launched a public consultation on guidelines to institutions and resolution authorities concerning resolvability testing
Guidelines to institutions and resolution authorities concerning resolvability testing
Resolution authorities have made a substantial progress in resolution planning since the adoption of the BRRD in 2015. As the continuation of the efforts made so far, the EBA launched in November 2022 a public consultation on its draft guidelines addressed to institutions and resolution authorities on resolvability testing.
The draft guidelines introduce three tools which will underlie a common framework for testing resolvability:
- An annually prepared and submitted self-assessment report by resolution banks, with the scope involving resolution entities at resolution group level and non-resolution entities with iMREL exceeding own funds requirements: The purpose of the preparation of this document is to obtain an overview of how banks
a. understand the resolution strategy,
b. comply with the resolvability and transferability guidelines,
c. maintain resolvability capabilities.
The first report is to be prepared in 2024. - A multi-annual testing programme by resolution authorities, leveraging on the self-assessment report: The scope comprises resolution entities at resolution group level and non-resolution entities with iMREL exceeding own funds requirements.
By establishing this concept, resolution authorities could gain assurance that the capabilities to execute the resolution strategy developed by institutions are meeting their resolvability objectives. The testing programme is expected to last over a period of three years and should be updated/confirmed by the resolution authority annually.
The first programme should be communicated to banks by year-end 2025 at the latest. - A Master Playbook for the more complex resolution groups in particular GSIIs and Top Tier banks and banks identified by the relevant resolution authority as reasonably likely to pose a systemic risk in case of failure (Fished banks), completed by the resolution entity at resolution group level:
The envisioned document incorporates inter alia key governance provisions, such as the key roles, responsibilities as well as the timeframes regarding decisions in the run-up phase and in resolution and the modalities for the application of respective sub-playbooks, such as bail-in playbook, transfer playbook, contingency plans for access to FMIs and communication plan. Thereby the Master Playbook serves as an overarching guide for information sources supporting board decisions.
The first version of the Master Playbook is to be prepared by year-end 2025.
Below, EBA’s timeline of the choreography between resolution planning requirement and testing (can vary from one jurisdiction to another)
Comments to the consultation paper can be submitted by 15 February 2023. The guidelines amending the EBA resolvability guidelines by adding a section on resolvability testing will apply from 1 January 2024.
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EBA consults on Guidelines to institutions and resolution authorities on resolvability testing
