We understand that the scope includes all the entities identified as group relevant, independent of their location, be it in the EU or in third countries. We believe this should be revised for decentralized entities with MPE resolution strategies. Decentralized banks are legally unable to include in their group recovery plan measures to be taken by the parent entity on behalf of their resolution entities/ subsidiaries. For example, in our case, the boards of each of our subsidiaries, where independent directors sit, have a fiduciary duty to the company’s various stakeholders (even more relevant when those subsidiaries are not wholly-owned). The parent entity has no legal authority and cannot decide on its own on the recovery plan of the subsidiary or on the measures to be applied by the subsidiary (e.g. the sale of one of our subsidiaries’ loan portfolios). Such decisions must be taken at the level of the subsidiary.
● In this sense we believe that the requirement is more adapted for SPE banks with a centralized business model and significant intra-group connections but disregards decentralized groups unduly penalizing those entities with an MPE resolution strategy.
● Therefore, the requirements on governance, indicators and options regarding coverage of entities identified as group relevant should either:
o Be waived for decentralized entities with independent and autonomous subsidiaries and with an MPE resolution strategy.
o Alternatively, the group recovery plan for this type of entities should merely represent the aggregation of the recovery plan for the parent entity and the corresponding recovery plans of each of the subsidiaries which could be included in an annex and approved by the competent management body of each subsidiary (as explained, the parent bank’s board would not be legally authorised to do so), provided they are correlated, aligned and fully consistent with the group corporate policies and the group recovery plan but taking into consideration the limitations described in the first paragraph (see above).
● Finally, the EBA should clarify if certain types of non-bank entities such as operative entities, SPVs, fintechs, etc. should be included in the group recovery plan. If they need to be included because they are relevant for the group, more guidance on the level of detail in the coverage requirement of those entities is needed.
We understand that the scope includes all the entities identified as locally relevant and based in the EU. This requirement should take into account the resolution strategy of the entity and the existing requirements for non-EU entities to elaborate recovery plans in accordance with their national law. For example, in the case of an MPE bank headquartered in the EU, the group recovery plan should not include indicators and measures regarding subsidiaries in the EU of a resolution entity based in a third country.
We fully agree with the level and width of coverage for entities which are not relevant for the group nor for the local economy/financial system.
We welcome the introduction of a transitional phase lasting two years from the date of publication of the final recommendation.