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How Smart Resolution Planning Can Help Banks Improve Transparency, Increase Profitability and Reduce Risk

Banking Perspective - The Quarterly Journal of the Clearing House (Q2 - 2015)

7 Pages Posted: 27 Jun 2015  

Paul Lippe

OnRamp Systems

Jan Putnis

Slaughter and May

Daniel Martin Katz

Illinois Tech - Chicago Kent College of Law

Ian Hurst

Global Financial Services at IBM

Date Written: June 25, 2015

Abstract

Resolution and Recovery Planning (RRP or “living wills”) is a new regulatory model, requiring new data, new processes, new tools, and new thinking, just as the Securities Exchange Act back in 1934 helped create modern accounting standards and reporting models. A living will is effectively a roadmap and simulation of the largest possible series of transactions in a bank’s lifetime. This type of analytical exercise is common in electronic systems design or software testing, but unprecedented in law and finance. It is axiomatic across the technology industry that to manage complexity requires standardization, modularization, and simplification.

RRP is not just about compliance, but operational excellence, and the banks that succeed at RRP will face both fewer regulatory headwinds and lower operational risk and cost of capital. Banks can leverage the work required for resolution planning to provide insight and efficiency across many business processes, using RRP as the legislative authors intended to reduce risk and improve operational excellence. Longer term, contracts and other forms of legal work product will become more accessible and easy to manage.

When undertaken effectively, RRP can help banks manage transparency regardless of scale using a data-centric approach, modernizing the legal function, and giving banks the benefits of superior analytics. Although there will be many challenges, a thoughtful approach to living wills can provide far greater benefit than compliance with the mandates alone – and become a realized marketplace advantage.

Keywords: Dodd Frank, RRP, Resolution and Recovery Plan, Living Wills, Machine Learning, Legal Technology, Computational Contracts, Legal Risk

Suggested Citation

Lippe, Paul and Putnis, Jan and Katz, Daniel Martin and Hurst, Ian, How Smart Resolution Planning Can Help Banks Improve Transparency, Increase Profitability and Reduce Risk (June 25, 2015). Banking Perspective - The Quarterly Journal of the Clearing House (Q2 - 2015). Available at SSRN: https://ssrn.com/abstract=2623027

Paul Lippe

OnRamp Systems ( email )

Bushnell Rd
Moffett Field, CA 94035
United States

Jan Putnis

Slaughter and May ( email )

One Bunhill Row
EC1Y 8YY
London
United Kingdom

Daniel Martin Katz (Contact Author)

Illinois Tech - Chicago Kent College of Law ( email )

565 W. Adams St.
Chicago, IL 60661-3691
United States

HOME PAGE: http://www.danielmartinkatz.com/

Ian Hurst

Global Financial Services at IBM ( email )

IBM MACC Center
33 Maiden Lane
New York, NY 10038
United States

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