Prudential Regulation Authority Rulebook

3.1

This chapter sets out the PRA’s expectations on the content and format of a firm’s report required under Resolution Assessment Chapter 3. 

3.2

The PRA expects a firm to develop a format for its written report that reflects the structure, size, and complexity of its business and operating model.

3.3

The PRA expects a firm’s report on its assessment of its preparations for resolution to cover, at a minimum, the following topics:

• A summary of the firm’s group structure. This should include a brief explanation of any key aspects of its structure (including as a result of the PRA’s ring-fencing requirements) that either facilitate or may pose impediments to orderly resolution.
• An explanation of the firm’s understanding of its resolution strategy. This should include a brief description of the actions the firm would take to support resolution actions by the Bank, using a stylised resolution timeline as outlined in Annexes 1 and 2 of the Bank’s Approach to Assessing Resolvability SoP as a reference tool for the overall resolution process.
• A summary of the capabilities, resources and arrangements in place to prepare for the firm’s resolution, and how they relate to the actions identified above. A firm should explain how it would achieve the resolvability outcomes set out in paragraph 2.3 with reference to barriers to resolvability. This includes the barriers identified in the Bank’s Approach to Assessing Resolvability SoP and others that may be specific to a firm’s particular structure and/or business model. The PRA expects a firm to describe any issues that could prevent the resolvability outcomes set out in paragraph 2.3 from being achieved.
• The anticipated timeline for completion of the steps the firm is taking to remove or reduce those risks, as well as a description of the controls in place to oversee the execution of those steps.
• A summary of testing. Where a firm has carried out testing of its existing capabilities and arrangements to substantiate its assessment, it should incorporate a summary of its testing into its report. This should include detail about the design and planning of the test, how the exercise unfolded, the team or individuals involved and lessons learnt.
• A summary of the governance processes that the firm has in place for performing its assessment and producing its report. A firm should describe how its governance processes meet the expectations set out in Chapter 5 of this SS. 

3.4

The Bank’s Approach to Assessing Resolvability SoP sets out further detail on what the Bank considers is needed to address the barriers to resolvability listed in paragraph 2.11 above. The PRA expects that the Bank’s Approach to Assessing Resolvability SoP will inform a firm’s assessment of its preparations for resolution, and subsequently, a firm’s report. A firm is also expected to identify how its compliance with PRA rules, such as those on OCIR, helps it to address the above barriers to resolution.

3.5

A firm may determine that it could achieve the resolvability outcomes^[4] without having some of the capabilities described in the Bank’s Approach to Assessing Resolvability SoP for example as a result of its structure, its business model or its resolution strategy. The PRA expects such instances to be exceptional, but if they were to occur, the PRA expects a firm’s report to explain why this is the case.

3.6

A firm should not treat its report as a regulatory compliance exercise. The PRA expects firms to describe all necessary actions required to support their preparations for resolution and to provide additional clarifications, details, and explanations of preparations where it would be necessary or helpful to the PRA.

3.7

The PRA expects a firm’s report to be written in an accessible manner which would enable the PRA to obtain a clear and accurate understanding of its preparations for resolution. It should contain as much information and analysis as necessary for the PRA to understand the firm’s assessment of its preparations undertaken for resolution. The report should typically be around 250 pages in length.

3.8

While a firm’s report should be sufficiently detailed and provide sufficient evidence to enable the PRA to understand its preparations for resolution, the level of detail should not be excessive.

3.9

The PRA expects a firm to avoid superfluous or unnecessary text in its report. In particular, a firm should not submit a significant volume of supporting documents such as contracts or operational documentation in its report. Instead, a firm should describe such documents, including how far they support orderly resolution.

3.10

The PRA notes that the content of a firm’s report may overlap in places with that of other reports submitted to the PRA or the Bank in accordance with other regulatory reporting obligations or expectations, such as the PRA’s expectations regarding a firm’s resolution pack submissions as set out in SS19/13 ‘Resolution Planning’^[5] or the EBA ITS on information for resolution planning.^[6] The PRA does not expect a firm to duplicate in its report any material that it has submitted to the PRA or the Bank in the discharge of other regulatory reporting obligations or expectations, such as resolution packs. Instead, a firm may cross-refer to the relevant documents, as long as the information therein remains correct as at the reference date of the report.

3.11

Rule 3.2 requires a firm to submit an updated version of its report under Rule 3.1 within 20 working days of a change in the assessment carried out under Chapter 2 of the rules. Examples of such changes may include:

• changes to group structures that may affect MREL issuance structures;
• major investments in capabilities that improve a firm’s preparations for resolution and/or reduce the risk of a firm’s disorderly failure;
• updates to its capabilities, resources, and arrangements made in order to achieve any outstanding steps undertaken to meet the objectives set out in paragraph 2.11; and
• divestments.

3.12

The PRA acknowledges that for reports made prior to Saturday 1 January 2022, firms will have had less time to achieve some of the objectives set out in paragraph 2.11.^[7]

3.13

The PRA considers that a firm’s report made prior to Saturday 1 January 2022 should meet the expectations set out in paragraph 3.3, but in light of paragraph 3.12 above may be focused more on outstanding steps, in addition to the capabilities, resources, and arrangements already in place.