Recommendations

The EBA adopted a formal Recommendation to ensure that major EU cross-border banks develop group recovery plans by the end of 2013. The plans shall be submitted to the respective competent authorities and discussed within colleges of supervisors. The aim of the Recommendation is to spur the development of recovery plans and to foster convergence on the highest standards across the Union.

The Recommendations focus on strengthening the panel banks’ internal governance arrangements, including a code of conduct. This should improve the identification and management of conflicts of interest, internal control arrangements including audits, record keeping and comparison with actual transactions.

This Recommendation states that national supervisory authorities should require the banks included in the sample to strengthen their capital positions by building up an exceptional and temporary capital buffer against sovereign debt exposures to reflect market prices as at the end of September. In addition, banks will be required to establish an exceptional and temporary buffer such that the Core Tier 1 capital ratio reaches a level of 9% by the end of June 2012. The amount of any capital shortfall identified is based on September 2011 figures and the amount of the sovereign capital buffer will not be revised. Sales of sovereign bonds will not alleviate the buffer requirement to be achieved by June 2012.

Following the 2011 EU-wide stress test, the Recommendation adopted by the EBA state that national supervisory authorities should require banks whose CT1 ratio fall below the 5% threshold to promptly remedy their capital shortfall.