Notional Amount Research Articles

Longevity hedge effectiveness using socioeconomic indices

This paper evaluates socioeconomic basis risk in longevity hedging. Using data for a full population stratified into socioeconomic groups, we explore the benefits and costs of two alternative hedging strategies, with and without basis risk, in the capital market. The benefit of the longevity hedge is represented by the risk reduction in the variability of a life annuity, whereas the cost is the notional amount of hedging contracts times the actuarial risk premium. We find that hedging is more cost-effective for the annuity provider when basis risk is eliminated. Moreover, it allows for a higher degree of hedge effectiveness at a cost that is equivalent to a hedge where basis risk is present. Finally, the yearly expenses related to hedging longevity risk require, at most, an extra added rate of return of no more than 0.16%.

Early evidence of the effect of ASU 2017‐12 on derivative disclosure compliance

AbstractThe growth in the use of financial derivatives for a variety of purposes has caused increased complexity in derivative reporting standards. As such, financial statement users have asked the Financial Accounting Standards Board to update guidance to increase transparency while preparers seek clearer guidance on the application of standards and a broadened scope of hedge accounting. The most recent derivative accounting guidance update, ASU 2017‐12 (Topic 815), broadens instruments that qualify for hedge accounting, expands allowable hedge accounting techniques, and reduces reporting requirements by omitting the reporting of hedge ineffectiveness. While these changes might simplify reporting requirements, there is the risk that the omitted disclosure would have been relevant to investors’ decision‐making. In this paper, we examine how derivative disclosure practices changed following the implementation of ASU 2017‐12. Using a hand‐collected sample of twenty S&P 500 firms, we calculate a derivative disclosure compliance (DDC) score and find that, on average, DDC scores decreased following firm adoption of ASU 2017‐12. This decline was realized for firms regardless of the notional amounts of derivative instruments held. However, the decline was not significant for early adopting firms suggesting a motivation for completeness by select firms. Our initial findings indicate that the update on derivative disclosures is not being uniformly applied potentially lessening its value to users. As a result, further updates may be necessary.

When leverage ratio meets derivatives: Running out of options?*

AbstractThis paper examines the impact of Basel III leverage ratio on the competitive landscape of US derivatives markets. Because the leverage ratio focuses on notional amounts and does not fully recognize offsetting positions and risk‐mitigating collateral, it is more likely the binding constraint for derivatives. The leverage ratio also put heterogeneous constraints on different types of institutions and activities. Using daily positions of clearing members and their customers on S&P 500 E‐mini futures options, we test the following four hypotheses when the public disclosure of the leverage ratio became mandatory in January 2015: (1) banks lose market share to nonbanks; (2) US banks lose market share to European banks; (3) banks' clearing activities shift away from customer accounts to house accounts; (4) low‐delta options are affected most by the leverage ratio. All hypotheses are confirmed in the data. Short‐dated US Treasury futures options, which receive zero exposure in the leverage ratio calculation, do not exhibit such behavior. Our evidence suggests that the leverage ratio requirement pushes derivatives activities toward less constrained institutions and market segments.

Under-reaction in the sovereign CDS market

The sovereign CDS market has developed rapidly for two decades and currently has a gross notional amount of more than a trillion dollars. We document a strong momentum effect in this market, which cannot be explained by a large set of risk factors. These momentum returns are positively skewed and higher during recessions. Consistent with the interpretation that this momentum effect is due to investors’ initial underreaction to sovereign credit information followed by corrections, our evidence shows that the momentum returns tend to be higher during the months surrounding announcements of credit rating or outlook changes of the underlying countries.

Compressing Over-the-Counter Markets

Over-the-counter markets are at the center of the global reform of the financial system. We show how the size and structure of these markets can undergo rapid and extensive changes when participants engage in portfolio compression, which is an optimization technology that exploits multilateral netting opportunities. We find that tightly knit and concentrated trading structures, as featured by many large over-the-counter markets, are especially susceptible to reductions of notional amounts and network reconfigurations resulting from compression activities. Using a unique transaction-level data set on credit-default-swaps markets, we estimate reduction levels, suggesting that the adoption of this technology can account for a large share of the historical development observed in these markets since the global financial crisis. Finally, we test the effect of a mandate to centrally clear over the counter markets in terms of size and structure. When participants engage in both central clearing and portfolio compression with the clearinghouse, we find large netting failures if clearinghouses proliferate. Allowing for compression across clearinghouses by and large offsets this adverse effect.

Systemic risk and firm size: is notional amount a good metric?

Purpose Many recently enacted financial regulations exempt smaller entities. While the literature on systemic risk provides efficiency justifications for certain exemptions, the efficiency rationale depends on measuring size appropriately. This paper aims to argue that notional amount, the metric used in derivatives regulations, is a flawed measure of an entity’s contribution to systemic risk. This study discusses an alternative size measure – entity-netted notionals or ENNs – which better reflects risk exposure as discussed in that literature and provides empirical evidence on these two metrics. Design/methodology/approach This study first discusses the relationship between the systemic risk literature and size-based exemptions. This study then describes the current metric and our risk-based alternative. Finally, this paper presents regulatory data on US interest rate swaps (IRS) and uses this to characterize some features of risk exposure. Findings The unique data set provides empirical insight into how well the size metric used in current regulations corresponds to a more theoretically oriented measure. This study finds the relationship between the metrics is fairly weak for entities for whom the size-based exemption will soon be ending, and provide an empirical basis for understanding why they differ. This study also provides evidence on the correlation of risk within this group of entities. Practical implications The paper has important implications for regulation of derivatives and financial markets more generally. To the extent exemptions for small entities make good policy, having the appropriate metric is critical. As such, the metric could be a valuable tool for regulators. Originality/value This paper examines the likely objectives of size-based exemptions from financial regulations and relates them to the systemic risk literature. It provides a unique empirical description of IRS positions, which allows us to examine the relationship between the metric used by regulators and our alternative.

Naprawienie szkody z art. 446 § 3 Kodeksu cywilnego wyrządzonej w wypadkach komunikacyjnych w świetle badań aktowych

The article presents the results of a case file study conducted at the Institute of Justice, concerning redress for material and non-material damage caused in road accidents in terms of redressing the damage referred to in Article 446(3) of the Civil Code [CC]. The study covered 72 cases in which such claims were asserted, out of a total of 922 cases studied, in which cases parties sought redress for material or non-material damage caused in road accidents. This fact alone shows that the claims under Article 446(3) CC are rarely asserted. This is the category of claims least frequently asserted in the analysed cases (redress for non-material damage, property damage or personal injury was pursued more frequently). The claimants in the analysed cases are exclusively natural persons, which is not surprising given that the claim can only be brought by people. Moreover, these claims are non-transferable before an action is brought, as provided for in Article 449 CC. Most claimants were represented by professional attorneys. The attorneys were always chosen by them, even when the claimant was exempt from court costs, which happened much more often than in civil cases on average. In principle, the defendants were insurers, which demonstrates that redressing the damage referred to in Article 446(3) CC, when caused by road accidents, is basically dealt with through commercial insurance. It should not be seen as strange, considering, on the one hand, the relative ease of seeking redress or compensation from the insurer (compared to the person who caused the accident), and, on the other hand, the mandatory nature third party liability insurance and the prevalence of casco insurance. In the majority of cases, compensation under Article 446(3) CC was partially paid by insurers in indemnification proceedings, but this compensation was mostly a notional amount (the median being PLN 10,000). The length of the proceedings was similar to the average for this category (register C), and where only claims under Article 446(3) CC were pursued it was significantly shorter. Importantly, claims under Article 446(3) CC were granted relatively rarely. On average, these actions were successful in less than 1/3 of cases, and the median of awarded compensation was 0. Contrary to widespread belief, the compensations sought in the statements of claims were not very high, with the median of PLN 30,000. An analysis of standard deviation of claims and actual awards shows that in case law extreme (i.e. exorbitant) claims were considerably moderated. Not very often, just in 18.1% of cases, the disputes ended in settlement. This can be explained by the fact that where parties saw any room for concessions, they did so at the stage of claims adjustment, while actions were only brought in cases where the parties were in dispute. The study in question demonstrates the minor practical significance of the claim under Article 446(3) CC. It is rarely asserted and even more rarely successful. The reasons for this cannot be determined by a statistical survey, however, it is possible to draw some conclusions. Supposedly, the claim in question is absorbed by other claims. In the case of damage of a strictly pecuniary nature, such as the injured party losing the person who provided his/her financial support, the claims are pursued under Article 446(2) CC. On the other hand, in the case of non-property damage caused by loss of a loved one (and not only the financial resources provided by the loved one), the compensation is sought under Article 446(4) CC. Although theoretically the entry into force of Article 446(3) CC led to clarification of the scope of interests protected by Article 446(3) CC by eliminating the effects of mental suffering, in practice this deprived the provision of any real meaning. The results of this study seem to illustrate that in practice it is difficult to find damage that would fall within the scope of disposition of Article 446(3) CC and at the same time would fall outside the scope of application of Article 446(2) or (4) CC.

Naprawienie krzywdy wyrządzonej w wypadkach komunikacyjnych w świetle badań aktowych

This paper is a result of research conducted at the Institute of Justice, concerning case law on redressing loss and wrong caused as a result of road accidents. The analysed cases ended in 2015. A number of conclusions can be drawn from the research. In the analysed cases, all claimants were natural persons, which should not come as strange, considering both the contents of Article 445(1) and the difficulty with the construction of a personal interest of a legal person infringed as a result of death of a specific person under Article 448 of the Civil Code. Moreover, these claims are non-transferable before an action is brought, as provided for in Article 449 of the Civil Code. Most claimants were represented by professional attorneys. The attorneys were always chosen by claimants, even when they were exempt from court costs, which happened much more often than in civil cases on average. In principle, the defendants were insurers, which demonstrates that redressing the wrong caused by road accidents is basically dealt with through commercial insurance. We should not find it strange, considering, on the one hand, the relative ease of seeking redress or compensation from the insurer (compared to the person who caused the accident, while on the other hand, the mandatory nature third party liability insurance and the prevalence of casco insurance. In the majority of cases, compensation was partially paid by insurers in indemnity proceedings, but this compensation was (in the cases of claims discussed in this paper) mostly a notional amount (the media being PLN 10,000). The proceedings lasted considerably more than the average in the category (register C), but we should observe that oftentimes this was caused by the particularities of adduced evidence. The need to obtain an expert opinion (sometimes opinions) and to hear witnesses and parties made it impossible to resolve the case in a single hearing, while often making it necessary to wait for time-consuming evidence to be adduced (mainly for expert opinions to be prepared and for parties to respond to the opinions). Contrary to widespread belief, the sums sought in the statements of claims were not very high, the median being PLN 37,000. These claims were, in the vast majority of cases, at least partially allowed. Claims were dismissed in full in just above 3% of cases, while allowed, on average, in 2/3 of cases. The sums awarded were not very high, with the median of awarded compensations at PLN 20,000. An analysis of standard deviation of claims and actual awards shows that in case law extreme (i.e. exorbitant) claims were considerably moderated. Not too often, just in some 15% of cases, the disputes were settled amicably. This can be explained by the fact that where parties saw any room for concessions, they did so at the stage of claims adjustment, while actions were only brought in cases where the parties were in dispute. The high ratio of (at least partially) allowed claims is accompanied by a fairly high level of stability of case law of first instance courts in the analysed cases. It is noticeably higher compared to average stability of case law in civil litigation in general. All this shows that – contrary to the expressed concerns – there is no escalation of claims of the injured parties or sums awarded by courts. Both the claimed and awarded compensation is within reasonable limits, additionally moderated by courts, which often allowed the claims only in part (that is, in principle and not as to the amount claimed). However, the high ratio of allowed claims and the high level of stability in case law do point out to irregularities in the claim adjustment procedures conducted by insurers. It can be said that at the pre-litigation stage the compensation is unjustifiably lowered, with the sums paid being rather notional in character than a true assessment of the loss/wrong. More adequate practices of the insurers, i.e. awarding higher compensation amounts, should contribute to both reduction in the number of cases concerning compensation coming before courts and to limiting court costs and costs of proceedings which insurers are obligated to pay (insurers were ordered to cover costs of proceedings in as many as 68% of cases).

Window Dressing Systemic Importance: Evidence from EU Banks and the G-SIB Framework

Building on previous research, we study banks’ balance sheet year-end patterns in the European Union (EU) to assess the impact on supervisory measures of their systemic importance. We find that some global systemically important banks (G-SIBs) in the EU compress their balance sheet at year-end to an extent that it allows them to reduce their systemic importance, thus potentially mitigating the impact of the G-SIB capital surcharges or avoiding G-SIB designation altogether. Since some year-end adjustments are a common feature, we compare G-SIBs’ adjustments to those of other systemically important institutions (O-SIIs) and observe that the compression of the latter banks’ balance sheets is notably smaller. G-SIBs’ balance sheets adjustments reflect several drivers, with the most notable year-end declines observed for intra-financial assets and liabilities as well as banks’ notional amounts of over-the-counter derivatives. Reduction is most pronounced for G-SIBs characterised by comparatively high leverage. This evidence of possible window dressing underscores the importance of supervisory judgement in the assessment of G-SIBs, which is indeed a core component of the identification process. We also suggest greater use of average as opposed to point-in-time data in the quantitative part of the G-SIB identification process.

How Do Global Systemically Important Banks Lower Capital Surcharges?

Global systemically important banks (GSIBs) are subject to capital surcharges that increase with systemic importance indicators. We show that U.S. GSIBs lower their surcharges to a large extent by reducing one indicator---the notional amount of over-the-counter derivatives---in the fourth quarter of each year, the quarter that determines surcharges. This seasonal drop is stronger at GSIBs than at other banks; it increased after GSIB surcharges were introduced; and it is largely driven by interest rate swaps. We discuss implications of these results for the design of systemic importance indicators.

Risk Transfer with Interest Rate Swaps

AbstractThis paper proposes Entity‐Netted Notionals (ENNs) as a metric of interest rate risk transfer in the interest rate swap (IRS) market. Unlike the ubiquitous metric of notional amount, ENNs normalize for risk and account for the netting of longs and shorts within counterparty relationships. Using regulatory data for U.S.‐reporting entities, the size of the market measured by notional amount is $231 trillion, but, measured by ENNs, is only $13.9 trillion 5‐year swap equivalents, which is the same order of magnitude as other large U.S. fixed income markets. This paper also quantifies the size and direction of IRS positions across and within various business sectors. Among the empirical findings are that 92% of entities using IRS are exclusively long or exclusively short. Hence, the vast majority of market participants are prototypical end users, and the extensive amount of netting in the market is attributable to the activity of relatively few, larger entities. Finally, some sector‐specific empirical findings are inconsistent with widespread, prior beliefs. For example, pension funds and insurance companies are typically thought to be long IRS to hedge their long‐term liabilities, and these sectors are indeed net long, but approximately 50% of individual entities in these sectors are actually net short.

Valuation of initial margin using bootstrap method

PurposeThe purpose of this paper is to propose the parametric bootstrap method for valuation of over-the-counter derivative (OTCD) initial margin (IM) in the financial market with low outstanding notional amounts. That is, an aggregate outstanding gross notional amount of OTC derivative instruments not exceeding R20bn.Design/methodology/approachThe OTCD market is assumed to have a Gaussian probability distribution with the mean and standard deviation parameters. The bootstrap value at risk model is applied as a risk measure that generates bootstrap initial margins (BIM).FindingsThe proposed parametric bootstrap method is in favour of the BIM amounts for the simulated and real data sets. These BIM amounts are reasonably exceeding the IM amounts whenever the significance level increases.Research limitations/implicationsThis paper only assumed that the OTCD returns only come from a normal probability distribution.Practical implicationsThe OTCD IM requirement in respect to transactions done by counterparties may affect the entire financial market participants under uncleared OTCD, while reducing systemic risk. Thus, reducing spillover effects by ensuring that collateral (IM) is available to offset losses caused by the default of a OTCDs counterparty.Originality/valueThis paper contributes to the literature by presenting a valuation of IM for the financial market with low outstanding notional amounts by using the parametric bootstrap method.

Analyzing the Impact of Derivatives on the Emerging Markets Financial Stability

In recent decade, volatility of stocks and interest rates, together with the globalization of capital markets, increased the demand on financial instruments with the purpose of distribution of risks. The estimation of the role of financial derivatives instruments is very important for the stability of international financial system. The impact of derivatives upon International Financial Crises is an issue that is still dividing academics and practitioners. This paper focuses on analyzing the roles of derivatives in the financial crises. Within the framework of this research, three (3) emerging countries were studied for 1997-2010 quarterly. OLS regressive equation was used for empirical tests. The model includes the following variables: crisis index (dependent variable) and independent variables which include: the Ratio of the Current Account to GDP, the Ratio of the Domestic Credits on Private Sector to GDP, and the Ratio of the total notional amounts outstanding of the exchange traded derivatives to Foreign Exchange Reserves. Empirical analysis shows that the influence of derivatives over financial stability is not unilateral, and it depends on the characteristics of the financial system of the country. The study conducted on example of emerging markets, particularly Argentina, Russia and Brazil, revealed negative influence of derivatives on the financial system.

Interest Received by Banks During the Financial Crisis: LIBOR vs Hypothetical SOFR Loans

The cumulative additional interest from LIBOR during the crisis is estimated to be between 1% to 2% of the notional amount of outstanding loans, depending on the tenor and type of SOFR rate used. The amount of LIBOR business loans owned by banks could have been as high as about 2trn, and the overall additional interest income banks received thanks to LIBOR could have been as high as 30bn dollars. The analysis also shows that a compounded SOFR reduces insurance relative to a term SOFR.

Risk Transfer with Interest Rate Swaps

This paper proposes Entity-Netted Notionals (ENNs) as a metric of interest rate risk transfer in the interest rate swap (IRS) market. Unlike the ubiquitous metric of notional amount, ENNs normalize for risk and account for the netting of longs and shorts within counter party relationships. Using regulatory data for U.S.-reporting entities, the size of the market measured by notional amount is $231 trillion, but, measured by ENNs, is only $13.9 trillion 5-year swap equivalents, which is the same order of magnitude as other large U.S. fixed income markets. This paper also quantifies the size and direction of IRS positions across and within various business sectors. Among the empirical findings are that 92% of entities using IRS are exclusively long or exclusively short. Hence, the vast majority of market participants are prototypical end users, and the extensive amount of netting in the market is attributable to the activity of relatively few, larger entities. Finally, some sector-specific empirical findings are inconsistent with widespread, prior beliefs. For example, pension funds and insurance companies are typically thought to be long IRS to hedge their long-term liabilities, and these sectors are indeed net long, but approximately 50% of individual entities in these sectors are actually net short.

Assessing the Impact of the Basel III Leverage Ratio on the Competitive Landscape of US Derivatives Markets: Evidence from Options

This paper examines the impact of Basel III leverage ratio on the competitive landscape of US derivatives markets. Because the leverage ratio focuses on notional amounts and does not fully recognize offsetting positions and risk-mitigating collateral, it is more likely the binding constraint for derivatives. The leverage ratio also put heterogeneous constraints on different types of institutions and activities. Using daily positions of clearing members and their customers on SP (2) US banks lose market share to European banks; (3) banks' clearing activities shift away from customer accounts to house accounts; (4) low-delta options are affected most by the leverage ratio. All hypotheses are confirmed in the data. Short-dated US Treasury futures options, which receive zero exposure in the leverage ratio calculation, do not exhibit such behavior. Our evidence suggests that the leverage ratio requirement pushes derivatives activities toward less constrained institutions and market segments.

Do Macro News Surprises of the US Affect Forex Implied Volatility? The Evidence of Japanese Yen in 1997-2015

This paper aims to provide an updated research on how macroeconomic news announcements a�?ٴect forex option implied volatility (IV). Forex options are actively traded and used by corporations and financial institutions for risk management, arbitrage and speculation. According to Bank of International Settlement, forex options make up the second largest segment of the global OTC option market [1]. At the end of 2014, the notional amount of outstanding foreign exchange option contracts is totaled at US$15 trillion. Given the important role of IV in options pricing, risk management, trading, investment and forex transaction services, it is worthwhile to explore how IV is a�?ٴected by macroeconomic news. Implied volatility (IV) as important market information Many previous studies analyze how a realized volatility can be predicted by news surprises, information embedded in forex options IV and econometrics models. For instance, Andersen conclude that historical volatility in the forex market is more powerful than predicted volatility obtained from GARCH-related models in forecasting future realized volatility [2-5]. Bush applies heterogeneous autoregressive (HAR) model suggested by Corsi and demonstrates that IV remains to be useful to predict future volatility if it is considered with together jump components in the forex market [6,7]. However, in the crude oil futures market, Agnolucci finds that GARCH-type models seem to outperform IV in predicting realized volatility [8]. Нese studies focus mainly on realized volatility and ignore a fact that IV itself is a collective perception on risk and a fundamental input for derivatives pricing. As information on risk, IV itself can a�?ٴect how market makers manage their quotes. For instance, studies on bid-ask spreads, such as Bollerslev and Melvin and King, find that spreads tend to be higher when IV increases [9,10]. Traders may consider IV as a pre-condition of specific hedge fund strategies. Studies on currency carry trades, such as Egbers and Swinkels, suggest that carry-trade strategies tend to su�?ٴer serious lose when IV turns sharply higher [11]. Нis may explain why traders tend to reverse their carry-trade positions a�?er increased IV see, Menkho�?ٴ] 12]. All these indicate that IV, regardless of its association with realized volatility, is important market information for asset pricing and trading. How market participants form their risk perception and determine the IV is an interesting research area.

Institutional Presence in Secondary Bank Bond Markets: How Does It Affect Liquidity and Volatility?

Using newly available information on euro area sectoral holdings of securities, this paper investigates to what extent the presence of institutional investors affects volatility and liquidity in secondary bank bond markets. We find that non-bank financial intermediaries, in particular money market funds (MMFs), have a positive impact on secondary bank bond markets’ liquidity conditions, at the cost of significantly increasing volatility of daily returns. The effect translates to more than a 19% improvement in liquidity conditions and up to 57% increase in daily-return volatility, assuming MMFs hold about 10% of the notional amount in the secondary market of a representative euro area bank bond. The effect is relative to the impact the non-financial private sector has on markets. Investment funds, insurance corporations and pension funds are found to similarly affect market conditions, though to a lesser magnitude. We find a trade-off between volatility and liquidity, where the stronger presence of institutional investors at the same time improves liquidity and increases volatility. The results suggest that possible structural shifts in investor composition matter for market conditions and should be monitored by financial stability authorities.

An Analysis of the Determinants of Inflation‐linked Bond Prices in Korea

AbstractWe estimate term structure using Korean financial data such as nominal spot rates, monthly inflation rates, and a survey of inflation forecasts, and examine the factors affecting Korean inflation‐linked bond prices. Inflation‐linked bond market yields are higher than the model yields generated using the term structure and the market‐model yield differential is explained by the expected inflation rate, on‐the‐run/off‐the‐run spread, trading volume, and bond fund cash flows. This shows that inflation‐linked bond investors understand the additional benefit of the tax exemption on the notional amount increment caused by inflation that the term structure model ignores, and the inflation‐linked bond price is also affected by liquidity and supply–demand pressure.

The Clearing of Euro OTC Derivatives Post Brexit – Why a Uniform Regulation and Supervision of CCPs is Essential for European Financial Stability

With a notional amount outstanding of more than USD 500 trillion, the market for OTC derivatives is of vital importance for global financial stability. A growing proportion of these contracts are cleared via central counterparties (CCPs), which means that CCPs are gaining in importance as critical financial market infrastructures. At the same time, there is growing concern that a new too big to fail problem could arise, as the CCP industry is highly concentrated due to economies of scale. From a European perspective, it should be noted that the clearing of euro-denominated OTC derivatives mainly takes place in London, hence outside the EU in the foreseeable future. For some time there has been a controversial discussion as to whether this can remain the case post Brexit. CCPs, which clear a significant proportion of euro OTC derivatives and are systemically relevant from an EU perspective, should be subject to direct supervision by EU authorities and should be established in the EU. This would represent an important building block for a future Capital Markets Union in Europe, as regulatory or supervisory arbitrage in favour of systemically important third-country CCPs could be prevented. In addition, if a systemically relevant CCP handling a considerable portion of the euro OTC derivatives business were to run into serious difficulties, this may impact ECB monetary policy. This applies both to demand for central bank money and to the transmission of monetary policy measures, which can be significantly impaired, particularly in the event that the repo market or payment systems are disrupted. It is therefore essential for the ECB to be closely involved in the supervision of CCPs. Against this background, the draft amendment of EMIR (European Market Infrastructure Regulation) presented on 13 June 2017 is a step in the right direction. In addition, there is an urgent need to introduce a recovery and resolution mechanism for CCPs in the EU to complement the existing single resolution mechanism (SRM) for banks in the eurozone. Only then can the diverse interdependencies between banks and CCPs be adequately taken into account in the recovery and resolution programmes required in a financial crisis.