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.

The European Banking Authority (EBA) launches today a consultation on Draft Regulatory Technical Standards (RTS) on the specification of the calculation of specific and general credit risk adjustments. These RTS will be part of the Single rulebook aimed at enhancing regulatory harmonisation in Europe. The consultation runs until 30 September.

Main features of the RTS

The proposed draft RTS elaborate on the specification for the calculation of specific credit risk adjustments (SCRAs) and general credit risk adjustments (GCRAs) under the applicable accounting framework for:

1. the determination of exposure values according to Articles 106 (exposure value under Standardised Approach), 162 to 164 (exposure value under IRB Approach), 241 and 261 (exposure value under Securitisation) of the CRR;
2. the treatment of expected loss amounts according to Article 155 (expected loss amounts resulting from IRB Approach) of the CRR; and
3. the determination of default under Article 174 (definition of default of an obligor or at credit facility level) of the CRR.

This RTS has been drafted in a way that it can be applied irrespective of the accounting framework.

Next steps

The proposed consultation paper is based on the draft Capital Requirements Regulation (CRR) as proposed by the European Commission on 20th July 2011. Significant changes subsequently proposed during the legislative procedure were also taken into account. As the text is still being discussed by the EU legislator, some of the mandates for the EBA to develop Binding Technical Standards (BTS) may be modified, added or deleted in the adopted Regulation. Therefore, the proposed RTS may be amended after the consultation to take into account the final CRR text.

These RTS have to be submitted to the EU Commission by 1 January 2013.

EBA, EIOPA and ESMA’s responded to the European Commission’s Call for Advice on the Fundamental Review of the Financial Conglomerates Directive.

The Joint Committee of the European Supervisory Authorities’ received a Call for Advice from the European Commission to look at the (A) scope of application, especially the inclusion of non3regulated entities (B) internal governance requirements and sanctions, and (C) supervisory empowerment of Directive 2002/87/EC on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (FICOD1).

This advice shall contribute to the European Commission’s fundamental review of the FICOD, following the short technical review, resulting in Directive 2011/89/EU (hereafter FICOD12).