The Single Resolution Board (SRB) and the European Banking Authority (EBA) have published their latest work on the topic of valuation in the context of resolution, following a similar route as the Bank of England in setting their expectations for banks´ valuation preparedness to support resolvability for UK banks.
In a background of growing regulatory pressure for banks to be valued in a timely and robust manner independent valuers and banks need to be able to demonstrate that they are able to meet this challenge.
Independent valuers, resolution authorities - directly, and banks - indirectly, would be expected to deal with these new expectations and guidances, when entering the valuation process and conducting the valuation to effectively inform the resolution decision. In more details:
These publications are the result of extensive work and close collaboration between the SRB and the EBA. This work is part of their respective 2019 priorities in this area, namely fostering a robust resolution framework in Europe and enhancing the overall robustness and consistency of resolution-planning work.
In addition to providing guidance to independent valuers, these publications specify the resolution preparedness requirements from banks to allow such valuations to be performed. Banks are expecting to receive further guidance in 2019, focusing on how to enhance banks´ valuation preparedness and to adjust Management Information Systems (including specific information reporting requirements, data template and information requests).
Already, we have observed further activities being implemented by resolution authorities to enhance the preparedness of European banks. For example, banks across European jurisdictions have been requested to develop bail-in playbooks and to provide data for the purpose of valuation in resolution (i.e. some banks have received data templates for asset and liabilities in the AQR style).
While not all banks are subject to these new requirements, we notice a rapidly increasing number of such requests. Banks are therefore advised to anticipate and include in the business as usual what such additional requirements will entail for them and their potential implications.
If a bank's valuation preparedness and capabilities are judged to be inadequate, the SRB is likely to follow a similar route as the Bank of England, requiring the bank to make the necessary improvements or to hold additional loss absorbing capacity.
|Basis of the document||- Expectations for independent valuers and general public
- “Comply-or-Explain approach” for independent valuers
|- Recommendation to resolution authorities in Europe
- Concrete guidance on the practical steps of the valuation process
|Addresses of the document
- primary addresses
- secondary addresses
|Scope of the valuation in resolution||Valuation 2 and Valuation 3||Valuation 1, Valuation 2 and Valuation 3|
|# of pages||57||96|