EBA recommends proportionate approach in coverage of entities in banking group recovery plans

The European Banking Authority (EBA) published today its final Recommendation on the coverage of entities in banking group recovery plans. This Recommendation, addressed to both Competent Authorities and institutions, aims at defining common criteria to identify entities that need to be covered in group recovery plans, as well as the extent of such coverage. These criteria will help institutions avoid a fragmented approach in providing information in recovery plans and gain a better understanding of the relevant supervisory expectations.

The EBA recommends that the coverage of entities in a group recovery plan be proportional to the relevance of the entities. For recovery planning purposes, entities should, therefore, be categorised as (i) relevant for the group, (ii) relevant for the economy or financial system of a relevant member state or (iii) not relevant for neither of the two. Different levels of information are identified for each category. The Recommendation provides also for an adjustment phase to ensure the smooth migration of recovery planning information currently available at the local level to the group level.

While the Recommendation does not interfere with the tasks and responsibilities of the home and host Competent Authorities under the Capital Requirements Directive (CRD) and Bank Recovery and Resolution Directive (BRRD), it is designed to limit requests for individual plans, based on an inadequate coverage of an entity in the group recovery plans. The Recommendation, therefore, aims at providing a common guidance to home and host supervisors, helping them to have better information at EU level and to ensure a smooth process in joint decisions.

The EBA has drafted this Recommendation on its own initiative in accordance with Article 16 of Regulation (EU) No 1093/2010. The Recommendation elaborates on the existing legal frameworks established by the Capital Requirements Directive (CRD), the Bank Recovery and Resolution Directive (BRRD) and the EU Commission Delegated Regulation 1075/2016, and builds on the experience the EBA has gained through thematic reviews of recovery plans as well as through its regular attendance of several colleges of supervisors.

The EBA will monitor the implementation of this recommendation, to assess the improvement in achieving consistent and efficient recovery planning arrangements for EU institutions.