How Smart Resolution Planning Can Help Banks Improve Transparency, Increase Profitability and Reduce Risk
Slaughter and May
Daniel Martin Katz
Illinois Tech - Chicago Kent College of Law
Global Financial Services at IBM
June 25, 2015
Banking Perspective - The Quarterly Journal of the Clearing House (Q2 - 2015)
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.
Number of Pages in PDF File: 7
Keywords: Dodd Frank, RRP, Resolution and Recovery Plan, Living Wills, Machine Learning, Legal Technology, Computational Contracts, Legal Risk
Date posted: June 27, 2015