The EU Single Resolution Board issued bids for the procurement of ‘advice and assistance on economic and financial valuation’ services to various legal and financial advisory consulting firms. The work order involved reviewing and enhancing documented recovery and resolution options for a distressed EU bank. It required a reconciliation of the bank’s portfolio valuations to market values, to assess the regulatory capital injection required to keep the bank solvent.
A EUR 20+ Billion portfolio was reviewed. It included residential and commercial mortgages, debt, derivatives, consumer and commercial loans, structured credit products, equities and other securities. An independent valuation assessment of all the financial assets including a detailed review of input parameters, calibrations, models utilized was completed. The exercise was conducted in conjunction with regulators and legal partners
A quarterly balance sheet valuation reporting process was put in place for the board of directors of the bank, and the regulatory authorities coordinating with the bank. Market valuations and portfolio assessments helped identify assets that could be sold to alleviate capital injection needs. Legal partners were supplied with stress and scenario valuations, and documentation on the underlying assets and valuation methodologies utilized.