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Guidance on solvent wind-down

The SRB has published guidance on solvent wind-down of derivatives and trading books in resolution, in line with its Expectations for Banks document, published in April 2020.

For certain banks, the size and complexity of their trading books could impede the credible and feasible implementation of their resolution strategies. Solvent wind-down is an approach that can be used for exiting trading activities in an orderly manner and avoiding posing risks to financial stability. The lack of a credible SWD plan could jeopardise the credibility and feasibility of the resolution strategy of any bank with material trading books.

The guidance was developed following work at Financial Stability Board level, surveys, a pilot exercise and consultation with G-SIBs. It applies to all banks with material trading books.

The guidance sets out the scope and minimum expectations for SWD planning and potential execution, with the main objectives to:

  • adequately prepare, develop and maintain banks’ capabilities for the planning of a SWD in resolution, and
  • to ensure execution capabilities of the SWD plan in a reasonable timeframe.

The application of this SWD guidance is specific to each bank and it may be adapted to individual situations in a proportionate manner.