Creating a simplified view: Exploring how RRP has shifted firm perspective

Creating a simplified view: Exploring how RRP has shifted firm perspective

City Scape Businessman Leader Thinking Concept

By William Salter, Managing Director, Recovery and Resolution, Citi.

William, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I have spent my career in three parts: starting with ADP’s Brokerage services division, where I became the manager of mutual fund related products; then management consulting with Coopers & Lybrand which became PwC, ultimately leading the Capital Markets practice in Tokyo; and Salomon which ultimately became Citigroup, where I have held senior roles in Audit, Compliance, Finance, and Corporate functions.  My current focus is the ongoing reengineering of the company to maintain operational continuity and assuring separability in stress scenarios.

Can you briefly explain the connectivity of legal entities?

Across financial services, the businesses of major industry participants are highly complex, and they often span multiple legal entities in multiple jurisdictions.  Booking models frequently result in inter-company exposures and dependencies, just as service models do.  That also results in multi-hatted employees who are essential to the support of multiple legal entities that may, in stress scenarios, reside in different insolvency regimes under the control of different laws and regulators.  Capital and liquidity are likewise intertwined.  Achieving financial, operational, and legal separability requires taking all these factors into account.

At the Recovery & Resolution USA Congress, you will be speaking on your insight regarding ‘Exploring how recovery and resolution planning has shifted firm perspective from the business line to legal entities, creating a simplified view’. Why is this a key concern right now? And what are the essential things to remember?

Businesses are how we live and measure ourselves, but they have no legal existence – they are artificial constructs.  Legal entities are how we live in terms of our regulatory, capital, liquidity, risk, contractual, tax, employment, fixed asset, and resolvability contexts.  It makes sense that the highly inter-dependent inter-entity connections of the most complex institutions have been required to streamline and simplify.  Only legal entities fail.

In your opinion, what are some of the main impacts of legal entity simplification on an organization structure?

Cleaner edges.  In at least some models, risk-taking operating entities and pure service entities are kept distinct, which allows for more efficient allocation of capital, facilitates separability, and supports operational continuity. In order to assure operational continuity in scenarios of extreme stress, whether that stress results in a recovery or devolves into resolution.

How do you see the recovery and resolution industry evolving over the next 6-12 months?

Enhanced review by regulators regarding the practicality of separability plans.

What would you say is the highlight of your career so far?

My opportunity to live and work first in London, and then in Tokyo, were tremendously enriching personal and professionally.  Dealing directly with the regulatory impact of the financial crisis was a tremendous challenge, both intellectually and in concrete terms, to rebuild from the ground up.

What do like to do after a long week at work to wind down?

Play with my 5 year-old.  Read history.

What came first, the chicken or the egg?

The rooster, of course…