Recovery Planning
at State Street Bank GmbH
As of December 31, 2014
Regulator Aims to Minimize Risks for Clients and Taxpayers
The presentation is focusing on Recovery Planning in regards to the requirements
SSB GmbH has to fulfil within Germany
Regulatory
Aims
•
Risk minimization for clients and taxpayers (esp. through
involvement / participation of the banks’ creditors)
•
Implementation of coherent recovery standards within Germany
as well as the European Union
•
Significant strengthening of the authorities
•
Avoidance of a bankruptcy of a bank due to an early initiation of
recovery measures
•
Supply of instruments for the recovery of banks in order to avoid
knock-on effects on other institutions or the financial system in
general
Legal Implementation
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Germany
KWG* (German Banking Act) and MaSan (Minimum Requirements for the Design of
Recovery Plans)
binding for State Street Bank GmbH as of December 31, 2014
Europe
Bank Recovery and Resolution Directive (effective since January 1, 2015) in conjunction
with the respective EBA Standards
* The relevant KWG were replaced by the SAG (German Recovery and Resolution Planning Act), which came
into force on January 1, 2015.
Strategic Business & Scenario Analysis as the Basis for
Increased Viability of Banks
• Recovery Planning is based upon the following principles
– Identification of key commercial as well as critical activities that will need to be
preserved in the event that an institution is under financial distress
– Institution must develop appropriate governance and measurement criteria to
identify financial distress and to determine when necessary actions need to be taken
– Recovery activities should have both a meaningful impact and should be achievable
within a reasonable period
– Scenarios should consider both idiosyncratic and systemic stress conditions
– Scenarios should cover two time horizons: short-term (sudden occurrence) and
long-term (gradual occurrence exceeding 6 months)
– The planned actions should result in the restoration of the institution’s capital and
liquidity position to appropriate regulatory levels
Recovery Plans must be kept confidential and may only be disclosed to third parties that are involved
in the development and implementation of the Recovery Plan (§ 47i para. 4 KWG or § 21 SAG)
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Recovery Planning for Preparation Purposes
SSB GmbH has developed a Recovery Plan in order to protect the viability of the institution
(Current) Normal Zone
Authority
Responsibility
Institution
Business Monitoring
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Being Prepared
Recovery Zone
Resolution Zone
Business Recovery
Authority Coordination
• Based on internal early
warning indicators (more
restrictive than official
restrictions) a threshold
violation would lead to
undertaking
counteractions
Recovery Planning
• Preparation / update of a
Recovery Plan on a standalone level
Resolution Planning
• Provide information for the
creation of the Resolution
Plan on request of the
resolution authority
• Decision which potential
Recovery Option/s will be
chosen
• Provide information to the
competent authority about
the situation and selected
Recovery Option/s
• No responsibilities
• No responsibilities
Recovery Planning
• Assessment of the
institution‘s Recovery Plan
(competent authority)
Resolution Planning
• Development of a
institution specific
Resolution Plan
(resolution authority)
• No responsibilities
• Potential options:
− Sell or transfer assets
into a special interim /
bridge institution
− Extraction of assets
− Usage of “Bail-In“
instruments
SSB GmbH Ownership
SSB GmbH is a wholly owned indirect subsidiary of State Street Bank and Trust Company
(“SSBT”), which is a wholly owned subsidiary of State Street Corporation (“SSC”). SSC and
all of its subsidiaries are collectively referred to as State Street.
SSC is a publicly listed (NYSE: STT) bank holding company and a financial holding company
headquartered in Boston, United States of America. SSC is subject to the supervision and
regulation of the Board of Governors of the Federal Reserve System in the United States
SSBT is the principal banking subsidiary of SSC and is a direct wholly-owned subsidiary of
SSC. SSBT’s primary federal banking regulator is the Board of Governors of the Federal
Reserve System in the United States. In addition, SSBT is subject to the supervision and
regulation of the Massachusetts Division of Banks and the Federal Deposit Insurance
Corporation
State Street has been identified as systemically important by the Financial Stability Board
and the Basel Committee on Banking Supervision
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The State Street Group is Characterized by its Strong
Financial Situation
Comparison of Major Capital Figures as of December 31, 2014
Potential differences of the underlying calculation methods between divergent jurisdictions may affect the presented capital figures
State Street Bank GmbH
State Street
Eligible Capital Total
1,309M EUR
14,711M EUR
Tier 1 Capital
1,245M EUR
12,984M EUR
Total Capital Ratio
26.4%
19.8%
Tier 1 Capital Ratio
25.2%
17.4%
State Street is characterized by a strong capital basis.
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State Street Bank GmbH‘s Recovery Plan Structure (1/2)
State Street Bank GmbH Recovery Plan
in accordance with KWG and MaSan
Executive summary of the Recovery Plan
the Recovery Plan
Part 1
Strategic Analysis
Part 2
•
Description of the credit institution including legal and organizational structure, key figures, business
activities, interconnectedness
•
Identification of business activities that are key commercial activity and/or critical activity:
Key Commercial Activity:
Identification of services that have a significant impact on the net assets, financial position and profit
situation
focus on SSB GmbH / internal impact.
Critical Activity:
Identification of services where in case of an inability of SSB GmbH to provide these a considerable
impact on the financial market infrastructure is expected
focus on financial markets / external impact.
Recovery Options & Stress Testing
Part 3
For detailed information regarding the requirements, please refer to next slide
Implementation of identified additional Recovery Options
Part 4
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Identification of additional recovery measures and detailed steps to implement such.
State Street Bank GmbH‘s Recovery Plan Structure (2/2)
State Street Bank GmbH Recovery Plan
in accordance with KWG and MaSan
Part 3 – Recovery Options & Stress Testing
• General Recovery Options: State Street Bank GmbH has to describe the potential toolbox of all
appropriate measures
• Stress testing: at least 6 scenarios to be defined & analyzed by State Street Bank GmbH
Regarded time horizon
Required scenario focus
Sudden occurrence
Gradual occurrence
Systemic Stress (e.g. a macro economic
crisis)
x
x
Idiosyncratic Stress
x
x
Combination of Systemic and Idiosyncratic
Stress
x
x
- State Street Bank GmbH analyzes more than the minimum required scenarios
- Special focus on the impact in order to ensure that they are affected to the least possible extent
•
•
•
•
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Definition of Recovery Indicators and escalation process
Recovery Options per stress scenario: Analysis regarding feasibility and prospects of success
Internal and external communication: Including communication strategy in case of stress
Information management: Analysis and description of the information availability in case of stress (information will be
provided to the regulator)
Summary
SSB GmbH has overcome the global Financial Crisis as well as the European Sovereign Debt
Crisis in good shape. This is because SSB GmbH is (inter alia) a well-managed institution
that is also characterized by a sound business model and a high degree of capitalization.
SSB GmbH performs scenario-based risk management already for many years in order to be
prepared for unexpected situations. Hence, in view of SSB GmbH the authority‘s requirement
to create and hand in Recovery Plans is considered to be positive. This is because an external
assessment as well as the discussion with the regulatory authority potentially enables SSB
GmbH to implement further improvements and hence to be better prepared for the future.
SSB GmbH complies with all recovery planning-related regulatory requirements.
As indicated before, State Street is a global systemically important financial institution, and
SSB GmbH is one of its larger and more significant subsidiaries and hence designated as a
Material Entity for purposes of State Street Corporation’s Recovery and Resolution Planning
requirements. Consequently SSB GmbH has to develop a Recovery Plan under German law.
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