How RRP fits into the global economy
On a global scale, regulations around risk management are developing very quickly. In November 2011, the U.S. Federal Reserve System and the Federal Deposit Insurance Corporation issued its resolution and recovery plan (RRP) rules. Similarly, governing bodies around the world, such as the Financial Services Authority in the UK, issued its RRP guidance in rapid succession. This past April, the European Parliament approved the formation of a centralized banking union.
Last April also saw the European Banking Authority adopt three new directives for banks operating within the Eurozone. Of these directives, the Bank Recovery and Resolution Directive (BRRD) has the furthest reaching impact.
The BRRD effectively eliminates the paradigm of bank bailouts, which in the event of financial crisis, has controversial consequences for both tax payers and banks. This mandate is important to banks because of the potential influence it holds over future regulatory rulings in the United States.
Many of the regulatory guidelines laid out in the Dodd-Frank Act were funneled down through the recommendations issued by the Financial Stability Board as a result of the 2009 G-20 summit. And with so many large banks now operating across multiple countries, RRP has become a global concern and high priority for banks of all sizes—what trends in one global market has a way of impacting regulatory trends everywhere.
Click here to see the press release from the European Commission issued after the European Parliament summit last April. This document outlines the rulings on the Bank Recovery and Resolution Directive, the Single Resolution Mechanism, and the Directive on Deposit Guarantee.