BoE discussion paper on CCP resolution execution and resolvability outcomes

The Bank of England (BoE) has published a discussion paper on central counterparty (CCP) resolution execution and resolvability. The paper focuses on three key resolution execution topics on the use of the BoE's resolution powers to resolve a CCP:

• Resolution powers and the credit hierarchy: how the BoE would manage the complexity arising in the calculation and execution of a resolution cash call.
• Returning value to CCP creditors: how value would be returned to CCP creditors that have recapitalised a CCP.
• Considerations in the execution of a statutory partial tear up: how the BoE would use its discretion when exercising its statutory tear up power in a default loss resolution, to return the CCP to a matched book.

The BoE also introduces draft "resolvability outcomes", requiring CCPs to demonstrate timely and robust capabilities to support the BoE's execution of resolution, including the ability to: (i) deploy recovery and resolution tools on the BoE's instruction; (ii) secure continuity of critical clearing services through resolution; and (iii) provide the BoE, HM Treasury and independent valuer with data, modelling and analysis as requested. The deadline for responses is 4 September. Feedback will inform a future consultation on CCP resolvability expected by the end of the year, with a further statement of policy on CCP resolvability expected in 2027. Responses may also be used to assess how the regime will apply to new firms and the appropriate degree of proportionality in the BoE's proposed policy on mobilisation of new CCPs.

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