“R&R” the Hard Way – the FSA’s Consultation on Recovery and Resolution


The UK’s Financial Services Authority (“FSA”) published its consultation paper on Recovery and Resolution plans on 9 August 2011. “R&R” is perhaps better known as a military term for “rest and recuperation.” Whilst the concept of recuperation features strongly in the FSA paper, there seems to be little scope for rest on the part of financial institutions covered by the proposals which will be expected to put detailed plans in place during the next year.

Following the implementation of the Banking Act 2009, which created a special resolution regime for banks and building societies in the UK, the Financial Services Act 2010 required the FSA to establish rules under which UK-incorporated deposit-takers will develop recovery and resolution plans (“RRPs”) or “living wills,” as they have also been termed. The FSA’s consultation paper sets out its proposals for the preparation of such plans. It also provides additional requirements for investment firms to undertake planning in relation to their client money and custody assets (“CMA”) holdings. Finally, the consultation paper includes a “Discussion Paper” section in which the FSA canvasses views in relation to certain issues relevant to the resolution of financial services firms.

The obligation to prepare RRPs will apply to all UK-incorporated deposit-takers and to certain investment firms. The FSA states that the scope of the regulation in relation to such firms is still under consideration but its current proposal is that investment firms with assets exceeding GBP15 billion should be subject to the requirement.

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