By Isabelle Winkles, MD, Recovery & Resolution Planning, Morgan Stanley.
Isabelle, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
I have been with Morgan Stanley over 17 years, in a variety of different areas of the Bank. Beginning my career in Investment Banking, followed by a few years in Equity Research, I spent four years at the Firm before attending Harvard Business School. These early years were critical contributors to my financial tool kit, developing my financial modeling, valuation, forecasting, valuation, and accounting skills. Following a return to the Research department for 4 years after business school, I was given the opportunity to join the Finance organization where I ran the Firm’s budget and multi-scenario P&L and balance sheet forecasting process, including the CCAR PPNR projections. Since 2014, I have moved into the Firm’s Corporate Treasury department where I run Legal Entity Management and the Wealth Management and Investment Management Treasury function. Over the last four years, my primary responsibility has been the development and execution of the Firm’s resolution financial model. In addition, other key responsibilities include cross functional coordination to optimize resource utilization across legal entities against a broad agenda of evolving constraints. These include but are not limited to tax 385, SEC security based swap dealer and CFTC swap dealer capital rules, un-cleared margin rules, and inter-affiliate long term debt accounting and valuation.
Can you explain the current requirements for resolution planning? And in your opinion, what is the best way to manage structural change?
The requisite capabilities for a credible resolution strategy are broad, and indeed, a brief paragraph could not do them justice. These capabilities range from capital and liquidity resource adequacy and positioning, operational continuity, continued access to financial market utilities such as CCPs, legal mechanisms to execute a firm’s resolution strategy, a rational legal entity structure, requisite MIS capabilities and an appropriately calibrated trigger and escalation framework. Incorporating these resolution capabilities into BAU practices should allow firms to take resolution considerations into account when contemplating structural changes.
At the Recovery & Resolution USA Congress, you will be speaking on your insight regarding ‘Reviewing the requirements of recovery and resolution planning, including transparency’’ Why is this a key concern right now? And what are the essential things to remember?
Understanding the requirements and where transparency is most valuable is a critical component of a successful resolution submission. In order to demonstrate resolvability, details around BAU practices, booking models, inter-affiliate transactions, contract analysis, legal entity structure, governance and financial forecasting (among others) must be clearly articulated, documented and embedded in the everyday practices of the Firm. These items are of particular interest to regulators as they all play a part in understanding any potential impediments to a resolution plan. Providing sufficient details to evidence strong governance, financial adequacy and a clear understanding of the evolving business will provide comfort to regulators that the planning for a resolution event is more than just a playbook that sits on a shelf of a model that lives in an IT system.