The EBA launched today a consultation on Guidelines identifying the minimum qualitative and quantitative indicators that institutions should include in their recovery plans. The proposed Guidelines have been developed within the framework established by the Bank Recovery and Resolution Directive (BRRD) for the recovery and resolution of credit institutions and investment firms. The consultation runs until 2 January 2015.
The BRRD requires banks to draw up recovery plans which set out measures they would adopt to restore long-term financial viability in case of severe distress. In doing so, institutions shall also establish indicators to identify when to trigger the escalation process envisaged in the recovery plan in order to assess whether appropriate recovery actions are to be taken. Competent authorities are required to assess these recovery plans and their recovery indicators, ensuring that institutions put in place appropriate arrangements for the continuous monitoring of the indicators.
The proposed Guidelines specify a minimum set of qualitative and quantitative indicators that institutions should include in their recovery plans, namely in relation to capital, liquidity, profitability and asset quality. The Guidelines also identify market-based and macroeconomic indicators that institutions should include if relevant to their legal structure, risk profile, size and complexity.
Institutions should not limit their set of recovery plan indicators to the minimum list provided by the EBA Guidelines. For this reason, the proposed Guidelines also provide a list of additional indicators for illustration purposes only.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 2 January 2015.
All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing will then take place at the EBA premises on 25 November 2014 from 15.00 to 17.00 UK time.
Legal basis and next steps
The proposed Guidelines have been developed in accordance with Article 9(2) of Directive 2014/59/EU (BRRD) which mandates the EBA to specify a minimum list of quantitative and qualitative indicators for the purposes of recovery planning.
These Guidelines should be read in conjunction with other regulatory products developed by the EBA in the area of recovery planning, in particular: (i) the EBA draft regulatory technical standards specifying the information to be contained in the recovery plan; (ii) the EBA draft regulatory technical standards specifying the minimum criteria that the competent authority is to consider when assessing recovery plans; (iii) the EBA guidelines specifying the range of scenarios to be used for recovery plans.