Resolvability
What is Resolvability?
Resolvability refers to how prepared a financial institution, specifically a PIDM member bank, is to go through resolution in a prompt and orderly way without causing severe disruption to the financial system. To assess this, PIDM uses a structured approach known as resolvability assessment, which is also a key component of resolution planning.
Why Resolvability Matters?
The resolution outcome will be shaped by how prepared a bank is when it enters resolution. For banks to be resolvable, it should have the necessary systems, capabilities and arrangements in place to support a rapid and orderly resolution if it happens. Resolvability assessment helps ensure this by identifying any gaps or impediments that might hinder the resolution process and guide the actions needed to address those impediments in advance.
How to Be Resolvable: Six Key Expectations
PIDM has identified six core areas to guide resolvability assessment for member banks:
Ensure arrangements are in place to maintain the continuity of operational services during resolution.
Ensure management information systems and technological capabilities can generate granular and timely resolution data.
Ensure readiness to measure and report liquidity needs and ascertain assets to be mobilised for liquidity during resolution.
Ensure communication capabilities are in place to support PIDM’s resolution efforts and stakeholder coordination.
Ensure continued access to financial market infrastructures during resolution.
Ensure arrangements are in place to ensure the continuity of Shariah contracts and other Islamic finance specificities to facilitate a resolution.
Each member bank is required to assess its capabilities and address any gaps, while PIDM conducts an overall resolvability assessment to determine preparedness.
Our Long-Term Commitment
Building resolvability is not a one-off exercise. It requires long-term commitment and investment. Some impediments are structural and take time to resolve. Others involve developing new systems and capabilities to be embedded into day-to-day operations. But the benefits are clear. Resolvable institutions are better prepared for crisis, more resilient in the face of stress, and contribute to the overall stability of the financial system.
To learn more about resolvability, please refer to FAQs here.