Recovery and Resolution Directive

Read about the EU Recovery and Resolution Directive (RRD), which establishes a comprehensive recovery and resolution regime for certain firms that we prudentially regulate.

The EU Recovery and Resolution Directive (RRD) establishes a comprehensive recovery and resolution regime. We transposed the Directive for certain investment firms that we prudentially regulate (IFPRU 730k firms), and group entities in a group that contains an IFPRU 730k investment firm or credit institution.

The RRD: overview

One of a number of EU initiatives to reduce future threats to financial stability in the wake of the 2008 financial crisis was the adoption of the Recovery and Resolution Directive (RRD) in May 2014.

The RRD ensures that a minimum set of tools and powers are available in all EU Member States relating to:

  • planning to help the recovery of firms in financial difficulty
  • early intervention in the event of problems
  • the resolution of failed firms in a way that reduces the costs to the public and mitigates the impact on the financial system

To prevent and tackle failures of cross-border firms in an effective manner, the Directive also sets out cooperation arrangements between Member States’ authorities.

The RRD is expected to make it less likely that banks and investment firms will fail. Where failure does occur, it should lessen the potential negative impacts on markets, the firm’s customers, and the financial system as a whole.

Find out more about the key elements of the RRD

The FCA’s role implementing the RRD

The RRD places a variety of responsibilities on the national competent authorities. In the UK, the FCA is the competent authority for solo-regulated firms. The Prudential Regulation Authority (PRA) is the competent authority for dual-regulated firms.

Most investment firms that are subject to the RRD are regulated prudentially by the FCA. We were required to transpose the RRD for those firms. The PRA was required to transpose the RRD for the firms that it regulates prudentially.

The RRD also requires each Member State to designate a resolution authority that is to develop resolution plans and take resolution actions when required. In the UK, the Bank of England has been designated as the resolution authority. This means that not all aspects of the RRD had to be implemented by us; many fall within the remit of the Bank of England in its capacity as the resolution authority.

Our transposition rules

The RRD has been implemented into UK law by a combination of Statutory Instruments made by the Treasury, and FCA and PRA rules. The main Statutory Instruments are:

The transposition of the RRD for IFPRU 730k investment firms required the FCA, as the prudential regulator of such firms, to make new rules. These consist of the changes to our Handbook that are required to transpose the elements of the RRD for which we are responsible:

The PRA has also made rules to implement the RRD in its capacity as the prudential regulator of the banks falling within the scope of the RRD and of its designated investment firms.

We have worked closely with both the PRA and the Bank of England throughout the process. We continue to do so when implementing our rules.

Firms that are affected

In line with the RRD, the rules we have made to transpose the RRD into our Handbook apply to:

  • investment firms that we prudentially regulate and that meet the definition in our Handbook of an IFPRU 730k firm
  • group entities in a group that contains a 730k investment firm or credit institution; this also includes certain types of firms that are authorised by the FCA

What you need to do

All IFPRU 730k investment firms and group entities in a group that contains an IFPRU 730k investment firm or credit institution should review the changes to our Handbook that we published in January 2015. They should then establish how the new rules will affect their business and take any steps necessary to comply.

Affected firms and group entities should also familiarise themselves with the: