Resolvability Assessment Framework

Overview

The Resolvability Assessment Framework (RAF) sets out how the Bank of England (‘the Bank’), as the UK’s resolution authority, assesses UK financial firms’ resolvability and introduces a public disclosure regime.

It builds on the work since the financial crisis to create a resolution regime that ensures firms can fail in an orderly way. The framework is designed to make resolution more transparent, better understood and more successful. We expect it to help market participants make more informed investment decisions. 

The Bank must be confident that it could use its powers effectively to resolve a firm if needed. This means protecting public funds, avoiding significant adverse effects on the financial system, and ensuring continuity of banking services and critical functions. 

The RAF applies to UK firms notified by the Bank that their preferred resolution strategy is bail-in or partial-transfer and material subsidiaries of overseas-based firms operating in the UK. It makes firms responsible for demonstrating how prepared they are for resolution.

Firms need to be able to show how the preferred resolution strategy set for them  could be carried out in an orderly way. This includes showing that they have identified any risks to their successful resolution. 

The Bank and Prudential Regulation Authority (PRA) published this framework in July 2019, following a consultation. 

Resolvability Assessment of major UK banks: 2022

Key parts of the Resolvability Assessment Framework

Update 10 June 2022: The Bank published the findings from its first assessment of the resolvability of the major eight UK firms as part of the Resolvability Assessment Framework. In parallel, the major eight UK firms also published their own public disclosures on their preparations for resolution. 

Update 28 May 2021: The Bank and PRA published updates to OCIR policy and the RAF:

• PS9/21 ‘Operational continuity in resolution: Updates to the policy’
• PS10/21 ‘Resolution assessments: Amendments to reporting and disclosure dates’
• Bank PS ‘Updates to the Bank of England’s approach to assessing resolvability’.

We have also published a new webpage listing the main policy documents related to the Resolvability Assessment Framework.

Update 18 December 2020: The Bank announced changes to the resolvability deadlines under the RAF for mid-tier banks. The deadline for mid-tier banks to implement the Statement of Policy ‘The Bank of England’s Approach to Assessing Resolvability’ and to achieve the three resolvability outcomes has been extended from 1 January 2022 to 1 January 2023.

This update accompanied changes to deadlines for certain firms to meet their Minimum Requirement for Own Funds and Eligible Liabilities (MREL). 

Update 7 May 2020: 
On 7 May 2020 the Bank, as Resolution Authority, and PRA announced measures to alleviate operational burdens on firms in response to the Covid-19 outbreak. Among these measures, it was announced that the PRA has offered firms, via a temporary modification by consent, a one year delay to the first reporting and disclosure dates for firms in scope of the Resolution Assessment Part of the PRA Rulebook. 

These firms will now be required to first submit a report of their assessment of their preparations for resolution to the PRA by October 2021 and to publish a summary of this report by June 2022. The Bank intends to make its first public statement on these firms’ resolvability by June 2022. As noted in the announcement, the PRA intends to consult in due course, principally with a view to aligning the dates in the Resolution Assessment Part of the PRA Rulebook with those in the modification by consent.

By holding firms accountable to regulators, the public and their investors, the RAF helps to ensure that firms would be able to fail in an orderly fashion without causing excessive disruption to the UK financial system.

The RAF has three main components:

1. How the Bank, as the UK’s resolution authority, will assess resolvability, building on work firms and the Bank have already done. The statement of policy, The Bank of England’s approach to assessing resolvability, outlines the outcomes the Bank is looking for from firms  to support resolution. Firms will use existing Bank and PRA policies, as well as new policies published alongside the RAF, to understand the objectives and principles they should meet.
   
   
2. A new Resolution Assessment Part of the PRA Rulebook that requires major UK firms (retail deposits greater than £50 billion) to assess their preparations for resolution, which must include the identification of any risks to successful resolution and plans in place to address those risks. Relevant firms must submit a report of that assessment, and publish a summary of their most recent report (public disclosure). The PRA Supervisory Statement SS4/19 Resolution assessment and public disclosure by firms sets out what the PRA expects these firms to do. It also highlights that senior management should be accountable for this work within firms.
   
   
3. The Bank’s intention to publish information on the resolvability of each major UK firm and where we believe there is more work for them to do. 

Resolvability Assessment Framework documents

The RAF is given effect by a Bank of England Statement of Policy, a new part of the PRA Rulebook, and a PRA Supervisory Statement. 

• The Bank of England's approach to assessing resolvability - Policy Statement and Statement of Policy (July 2019)
• PS15/19 - Resolution assessment and public disclosure by firms (July 2019)
• SS4/19 - Resolution assessment and public disclosure by firms (July 2019)
• The RAF consultation package, comprising the Introduction to the RAF, a PRA CP and a Bank CP (December 2018)
• Resolvability Assessment Framework: Related policy documents
• Resolvability assessment of major UK banks: 2022