Prudential Regulation Authority Rulebook

3.1

As firms experience stress, and approach possible resolution, they will come under increased scrutiny. They should anticipate that the authorities will need additional, or more up-to-date, information in order to facilitate their contingency planning and their efforts to contain the situation. The information requested will depend on the specific circumstances of each firm. However firms should ensure that they are able to meet the requests outlined in this chapter at short notice. 

3.2

In preparation for a firm’s potential entry into resolution, the authorities may need additional information to facilitate protection of the firm’s deposit-taking function. This may include (among other information) the items below.

1. (i) Updated SCV 
2. (ii) Information on systems used for deposits and key staff responsible for these systems
3. (iii) Granular deposit information:

1. o Product composition (eg current, savings, bonds)
2. o Average balance per depositors
3. o Customer segmentation (including data on cross-selling where available)
4. o Geographical domicile of depositors
5. o Breakdown of foreign currency deposits
6. o Customer stickiness, broken down by product type
7. o Average cost of funding for deposit book, broken down by product type (including details of bonus rates, interest rate floors/caps). Historical funding cost data.
8. o Historical deposit flows

3.3

Firms may be expected to provide up-to-date information on holders of debt liabilities (to the extent possible) to assess loss-absorbing capacity.

3.4

Firms will be expected to provide up-to-date liquidity information to support contingency planning.

3.5

During the resolution or recovery process, there may be circumstances in which the Bank considers it necessary to provide liquidity to firms, secured against their assets. Firms should be able to supply information on their assets to enable the Bank to make a rapid assessment of the quality of collateral and the lending capacity, and to take security over collateral if it does lend. Firms may be asked to provide information on the amount and types of assets held, and those that could be used as collateral, as outlined below.

Classification of assets as eligible or ineligible collateral should be based on assessments by the individual firm against the Bank’s criteria. High-level criteria for securities and loans are listed on the Bank’s website. In addition, loans must meet the following criteria to be eligible:

• Firms must be able to provide a full and accurate description of the loans and securities it proposes to use as collateral.
• Firms must be able to provide loan-level information according to the Bank’s data templates. These are available on the Bank’s website.
• The loans must be held on the firm’s balance sheet, and not on that of a subsidiary.
• The Bank must be able to complete satisfactory legal due diligence on the loans. As a minimum, the firm must be able to confirm:

1. (i) There are no restrictions in its own financing documents (where the firm is a borrower) which could prevent it from transferring the loans to the Bank or providing security over any of its unencumbered assets.
2. (ii) The governing law of the loans and any related security documents. Where relevant, the firm should also be able to confirm the Centre of Main Interest (COMI) for each borrower.
3. (iii) There are no restrictions on the assignment of loans to the Bank or any third party.
4. (iv) There are no restrictions on disclosure of information to the Bank or any third-party assignee/transferee.

For the avoidance of doubt, these conditions do not represent a comprehensive set of legal terms that the Bank will seek comfort on in conducting legal due diligence on the loans.

Firms should specify the main restrictions that apply to the ineligible assets in the ‘Barriers to eligibility’ column.

3.6

In preparation for potential resolution, the authorities may need more detailed information relating to the cash services function the firm provides, including the information below.