The 2007 / 2008 global financial crisis highlighted the need for structural banking reform to respond to the issue that some financial institutions are “Too Big To Fail” (TBTF). Regulatory authorities designated those institutions that were considered TBTF as Systemically Important Financial Institutions (SIFIs) and defined new regulations applicable specifically for SIFIs. The resilience and resolvability of SIFIs increased through new prudential requirements and the establishment of recovery and resolution plans.
PwC’s Zurich-based Center of Excellence for RRP can assist you with thought leadership and hands-on experience to ensure regulatory compliance and to facilitate strategic decisions for securing a competitive advantage.
Recovery and Resolution Plans require significant commitment. They can be extensive and complex, addressing all of the business implications and operational changes that may be required to deliver effective, realistic and pragmatic plans and ultimately a credible solution to resolve the TBTF issue. We can help you with the conceptual design, the establishment, the enhancement or the review of your recovery and resolution plans.
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.
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.
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.
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).
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 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:
Director Financial Services Strategy Consulting, PwC Switzerland
Tel: +41 58 792 14 05