The European Banking Authority (EBA) launches today a consultation on Draft Regulatory Technical Standard (RTS) on the content of recovery plans. In doing so the EBA starts the preparatory work for the implementation of the Recovery and Resolution Directive (RRD) currently discussed by the EU legislators. The consultation runs until 11 June 2013.
These RTS will contribute to the European Single Rulebook in banking and aim at enhancing financial stability and minimising the probability of banks’ failure.
Recovery plans shall set out the arrangements and measures a bank would adopt to restore long-term financial viability in case of severe distress. According to the proposed draft RTS, recovery plans developed at group and individual level will need to include at least the following 5 key parts:
(i) summary of the recovery plan;
(ii) governance, including the conditions and procedures necessary to ensure a timely implementation of the recovery options;
(iii) strategic analysis, including a description of the institution’s core business lines and critical functions together with the different recovery options designed to respond to financial stress scenarios ;
(iv) communication plan, including external and internal communication arrangements;
(v) and preparatory measures taken or to be taken to improve the implementation and effectiveness of the plan.
The content proposed in these RTS builds on the EBA Recommendation issued in January 2013 to foster the development of group recovery plans and their discussion within colleges of supervisors.
The proposed consultation paper is based on the draft Directive establishing a framework for the recovery and resolution of credit institutions and investment firms (the so-called Recovery and Resolution Directive - RRD) as proposed by the European Commission on 6 June 2012. As the text is still being discussed by the EU legislators (European Parliament and Council), the draft RTS might be amended after the consultation to take into account inter alia possible changes in the final RRD.
The EBA will submit the final draft RTS on recovery plans within 12 months from the date of entry into force of the RRD.