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Resolution of banks: What kind of scenarios to enhance the credibility and the feasibility of resolution strategies
Journal of Financial Compliance,
3
(4),
325-331
(2020)
Abstract
A resolution strategy for banks needs to be feasible and credible. Asking banks to work on their resolvability is a major issue and therefore the resolution strategy developed by the authorities needs addressing the scenarios that are most likely to materialise and lead the institution to resolution. The aspects to be considered are the speed of the scenarios, the liquidity risk to be faced rather a solvency one, the consideration of systemic and idiosyncratic shocks and the perimeter of the resolution group. Based on the experience, there is a need to improve resolution planning and selection of the most adequate resolution strategies. This should cover the range of scenarios considered in resolution planning that has to be broadened in, how to better take into account recovery options in resolution planning and Minimum Requirement for Own Funds and Eligible Liabilities setting, how to consider systemic scenarios in the preliminary public interest assessment and finally what should be the perimeter of the resolution group. While resolution planning has made very good progress as resolution regimes have been established, taking into account those points will be major improvements.
Keywords: resolution strategy; resolution scenarios; resolution groups; recovery options
The full article is available to subscribers to the journal.
Author's Biography
Frédéric Visnovsky is deputy Secretary General at Autorité de Contrôle Prudentiel et de Résolution (ACPR) in charge of resolution since July 2018, and he is also Médiateur national du Crédit at Banque de France and secretary general of the Consultative Committee of the Financial Legislation and Regulation (CCLRF). He is currently member of the plenary of the Single Resolution Board (SRB) and member of the Financial Stability Board (FSB) Resolution Steering Group (ReSG). Before (2011–2018), he was deputy Secretary General at ACPR in charge of the departments dealing with the supervision of banks and international affairs and study and chair of the European Banking Authority (EBA) Standing Committee on Accounting, Reporting and Auditing (SCARA). Frédéric joined the Banque de France in 1984 as Financial Analyst before becoming Financial Counsellor at the French Embassy in Algeria for three years. Joining the Commission Bancaire, he was successively Head of the Accounting Department when Base des Agents Financie (BAFI) (new prudential reporting) was introduced (1992–1996), Head of the International Department during Basel 2 negotiation (1997–2003), and Deputy Director and Director for Supervision of Mutual Banks and Investment Firms (2004–July 2011).
