Due to increased regulatory focus over the last decade on improving financial resilience in the banking sector, as well as the recent government Covid-19 support programmes, the sector as a whole has suffered less stress than many other industries. New and challenger banks have been under the greatest pressure within the sector, often due to sub-scale operations, financing issues or the impact from a reliance on specialist lending. In some cases this has translated into pressures on regulatory capital minimums and liquidity requirements.
A recent area of focus for regulators has been on solvent wind down plans (“SWDP”) as an evolution of resolution planning, bringing a more practical perspective designed as an alternative to an insolvent exit. This is to ensure that the failure of a recovery plan for a distressed bank does not result in resolution or insolvency, but rather results in a controlled wind down in which all depositors are paid out in full. Historically, SWDP’s have not been at the top of the board agenda and have been seen as a theoretical compliance exercise, however, they are increasingly coming under regulatory scrutiny to ensure they are both appropriately costed and practically implementable. This is particularly relevant for new banks, with their pillar 2b regulatory capital being set in line with their SWDP.
Looking forward, banks are considering how regulatory requirements will continue to evolve, particularly post-Brexit and as a result of the industry-wide digital transformation required to meet the changing demands of retail consumers. Furthermore, in a low interest rate environment, increasing scale and a stable funding base is also likely to be at the top of the agenda leading to potential M&A opportunities in the mid-tier.
We led the wind down and solvent liquidation when Standard Chartered decided to exit from its Swiss private banking business. This involved analysing the client and asset base to identify optimal wind down approaches (a combination of transfer to other booking centres, portfolio sale, transfer to the Court and account closure).
Introduced potential buyers for portfolio sale. Led the regulator engagement plan and activities. Developed bespoke single version of the truth database to track and direct activity.
Optimised the wind down of the organisation and infrastructure, remaining fully compliant with regulatory requirements as AuM decreased.
Resolved legacy issues including established archiving and retrieval capability and acted as liquidator to achieve dissolution.
Pan-European Entity Restructure
In order to deliver a stronger pan-European Wealth Management bank, free up capital, simplify the regulatory environment and facilitate standardisation of platform and optimisation of organisation, the bank opted to undertake a simultaneous cross border merger of 8 countries into one, using a first of its kind simultaneous cross border merger.
We led the corporate transaction, supported the PMO and TOM development and provided point assistance to the Legal, Risk and Finance functions as required.
The project was complex from a legal and cultural change perspective requiring detailed planning and rapid resolution of issues.
Transactions were delivered enabling release of significant capital and facilitating operational cost improvements.
Market Exit Contingency Plan
The client wished to exit from its Slovenian subsidiary and was investigating a share sale option. In case a share sale was not possible (e.g. if the buyer chose to purchase only part of the business), the bank engaged us to develop a contingency plan to meet regulatory requirements.
We reviewed the balance sheet and, on an asset class basis, determined the optimal wind down approach and estimated the likely timeline and cost.
We reviewed the operational infrastructure and prepared an outline plan for wind down with cost estimates.
We prepared a fully costed contingency plan and supporting Board pack.
The Bank eventually successfully executed a share sale and the contingency plan was never implemented.
