Prudential Regulation Authority Rulebook

2.1

This SS applies to firms that meet each of the following criteria:

1. a) firms that have been identified by the PRA as an O-SII;
2. b) firms that have the full or partial wind-down of their trading activities as a recovery and post-resolution restructuring option; and
3. c) firms that have either been notified by the Bank that their preferred resolution strategy is Bank-led bail-in, or have been notified by the Bank that they are a ‘material subsidiary’ of a third-country group for the purposes of setting internal MREL in the UK.

2.2

The PRA expects firms to understand their own business models and the impact a disorderly wind-down of trading activities would have on their balance sheet. Given the systemic importance of TWD firms, TWD firms that engage in trading activities should have the full or partial wind-down of their trading activities (TWD option) as a recovery option.

2.3

The PRA expects a firm not to discount the TWD option on the basis that it may not be able to resume trading activities following a wind-down. In accordance with Rule 2.11 in the Recovery Plans Part of the PRA Rulebook, the implementation of arrangements proposed in the recovery plan should be reasonably likely to maintain or restore a firm’s viability and financial position; this may involve a firm having recovery options that may fundamentally change the firm’s structure and business model.^[11]

2.4

If firms are in any doubt about whether they should have the TWD option as a recovery and post-resolution restructuring option, they should speak to their PRA supervisor.

2.5

These expectations do not apply to third-country branches and other firms with smaller and less complex trading activities. However, other PRA-regulated firms may find these expectations helpful in developing capabilities that are appropriate to the size and complexity of their trading activities. If such a firm starts to anticipate that it is going to become a TWD firm, as its business changes or grows, it would need to anticipate meeting these expectations. These other firms continue to be subject to Rule 2.11 in the Recovery Plans Part of the PRA Rulebook and so are required to be able to implement their recovery plans quickly and easily in a stress.