When designing banking models capable of recovery and resolution, it's essential for banks to understand the regulatory requirements involved.
Resolution poses many challenges for banks. When designing a commercial banking model with operating structures that are capable of facilitating recovery and resolution, it is essential for banks to understand clearly how to navigate the regulatory requirements and what to focus on to meet each of these specific challenges.
With the main components of a resolution regime for banks now in place across Europe and the regulatory requirements becoming clearer, banks should ensure that the various strands of their recovery and resolution planning work are fully joined-up; that they have identified and are tackling any remaining impediments to resolvability; and that they have implemented commercially viable solutions that meet the needs of customers, investors and regulators.
Three main areas can be identified as being of critical importance for resolution planning, namely the need for robust operational continuity to enable critical functions to be preserved in a resolution, sufficient loss absorbing capacity, and valuation preparedness. Additional complexities must also be carefully assessed, such as anticipating the potential issues arising from having operations across jurisdictions.
This paper discusses primarily these challenges facing larger banks in Europe, and follows KPMG International's earlier paper on Recovery Planning.