Recovery and Resolution Planning (RRP) incl. structural reform

Scenario modelling

Historically, RRP scenario modelling was primarily compliance centric. Recently, management of the industry leaders started to recognize the strategic benefits of RRP scenario modelling. Under this new paradigm, RRP scenario modelling will enhance substantially. Those institutions that address the industry trend wisely will gain a competitive advantage on being regulatory compliant and providing management with strategic tools to sustain or even mitigate an extraordinarily severe crisis. We can help you with the conceptual design, the establishment or the enhancement of an RRP scenario model as well as the review and challenge of your existing RRP scenario model.

Playbooks and testing

SIFIs are more and more asked to provide transparency on their critical processes during the recovery or resolution phase. For this purpose, rapidly actionable playbooks are established that provide a detailed description of the sequence of activities required to successfully execute those critical processes during recovery or resolution. We can help you with defining the scope, the structure and the documentation of playbooks as well as establishing the process descriptions themselves. We can also support you in defining a testing concept for your recovery and resolution plan as well as the definition, the execution and the evaluation of test cases.

Liquidity considerations (sizing, allocation and transferability)

Regulatory authorities expect SIFIs to have the liquidity capabilities available which are necessary for executing its recovery plan and preferred resolution strategy. We can help you with developing and further enhancing these liquidity capabilities including appropriate sizing, allocation and transferability of liquidity.

Capital considerations (SPE / MPE Bail-in, TLAC and ILAC)

Bail-in is the power to convert liabilities into equity or to write-down / write-off liabilities in order to recapitalize the group and to ultimately avoid public bailout. We can help you with developing and strengthening capital capabilities including appropriate sizing, allocation and transferability of capital as well as support you in developing or operationalizing the resolution strategy (SPE or MPE).

Temporary stays of financial contracts

Since the early termination of financial contracts can have severe destabilizing effects for a SIFI entering into resolution, regulatory authorities across the world have been empowered with the right to impose a temporary stay of termination. We can help you understand in detail and keep track of the evolving regulatory developments in different jurisdictions as well as identifying contracts that are in scope of any of such regulation. We can further support you with implementing the legal mechanisms with your clients in a coordinated approach and set up risk management measures to ensure ongoing compliance.

Restructuring / structural reform

Restructuring typically impacts and shapes a SIFI across all its divisions / functions, legal entities and jurisdictions. Insights from RRP indicate, however, that credibly resolving the TBTF issue conflicts with certain structural set-ups of a SIFI and will hence implicitly banish some of them. We can help you in particular with the following aspects:

• Assessing options for optimizing a SIFI’s legal entity structure including legal entity rationalization / simplification
• Establishing transparency on your booking model (including back-to-back transactions)
• Identifying and transferring positions, books and / or clients across entities including pro-forma modelling of impacts and individual legal entities
• Evaluating and implementing ring-fenced and non-ring-fenced bank entities
• Conceptually designing and implementing shared service companies