Living Will and Resolution Planning
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Living Will and Resolution Planning

Representative Engagements

The Financial Stability Board (FSB) recommends that regulators require major banks in their jurisdictions to produce an annual Recovery and Resolution Plan (RRP). In the U.S., the Federal Reserve Board (FRB) requires large bank holding companies to prepare Recovery Plans, while the Dodd-Frank Act requires Resolution Plans under a joint rule from the FRB and the FDIC. Financial firms that operate in multiple jurisdictions are required to write plans that satisfy multiple regulators. An RRP is an enterprise-wide exercise that covers all material aspects of a firm’s activities and its legal entities.

 


Promontory has been a pioneer in helping financial institutions meet regulatory expectations for these new plans.  Our hands-on experience and careful monitoring of changing regulatory expectations enable us to understand the challenges facing banks in producing an RRP, regardless of whether the institution is large or medium-sized, or operating in one jurisdiction or many.   

Our strength in assisting firms with RRPs comes from the wide range of experienced professionals we have on staff.  Our professionals include former senior officials of the FRB, FDIC, OCC, the Bank of Canada, the UK Financial Services Authority, the Bank of England, Japan's Financial Services Agency and other prudential regulators, many of whom have sat on the Basel Committee and the FSB, as well as former industry executives with financial crisis and resolution experience.  Our staff also participates in global industry working groups on resolution planning. This unusual mix of experience allows us to interpret and anticipate regulators’ expectations and to form practical solutions to the myriad issues that arise when crafting an RRP.  

Promontory provides a full range of assistance for the development of U.S. and international RRPs. Each engagement receives a customized service calibrated to that firm’s needs and circumstances.  Given that resolution planning is a multi-regulator process with evolving regulatory expectations, Promontory can be helpful in sorting through ambiguities and potential regulatory conflicts.  Promontory also advises on aspects of the RRP process such as systemic risk and resolution regime planning.  

Promontory’s assistance encompasses:  

Project scoping and planning  

  • Advise on approach  
  • Define requirements and proper resourcing  
  • Assess opportunities to leverage existing processes and analytics 
  • Identify business value-added opportunities and synergies 

Recovery and Resolution Plan analysis and development 

  • Provide expert advice and guidance on approach 
  • Facilitate workshops and lead work streams 
  • Develop, analyze, test and implement methodologies and solutions for:               
    • Definition of core and critical functions 
    • Legal entity mapping
    • Separability analysis 
    • Financial crisis information needs assessment 
    • Systemic risk information collection and analysis  
    • RRP scenarios, stress testing, financial analysis, contingent funding, de-risking actions, and capital recovery  
    • Resolution analysis 

  • Evaluate recovery and resolution options 
  • Determine crisis management governance arrangements and triggers to activate plans 
  • Prepare communications plans and stakeholder management strategies  
  • Draft RRPs 

Regulatory advice, challenge function and identification of management actions  

  • Review and challenge work from a regulatory perspective as it is completed 
  • Assist management in devising management commitments to address vulnerabilities to ensure plan credibility and provide business value from the exercise 
  • Help clarify regulatory ambiguity 
  • Prepare for meetings and interactions with regulators 

Representative Engagements

  • Drafted an RRP for an international bank that reflected the assessment of senior executives with data and analysis input from bank staff. The work touched all main aspects of plan production, such as leading work streams, developing methodologies, analyzing findings, and challenging the credibility of the plan.   
  • Provided advice and methodology support to a multi-national bank that drafted the plan itself.  Contributed extensively in specific areas where expertise was not available within the bank, such as the self-assessment of systemic risk and importance and information needs assessment.  
  • Provided the challenge function to a plan drawn up by a medium-sized institution operating largely in one jurisdiction and helped prepare executives and staff for meetings with regulators.  Assisted the bank with scenario development, identification of vulnerabilities, reverse stress testing, and determination of recovery actions. Also advised on governance structure and interrelationship with other risk management and contingency plans.