The European Banking Authority (EBA) published today its fourth thematic comparative Report on recovery planning. The focus of this comparative analysis is recovery options, which are crucial for assessing institutions' actual capacity to regain viability following a period of severe financial distress. Overall, recovery plans in the sample provided a good overview of recovery options and clear improvements were seen across the board, although some challenges still remain. This benchmarking exercise aims at supporting supervisors in their assessment to identify the crucial elements that banks should consider when designing and selecting credible recovery options.
The analysis showed that in the vast majority of cases, banks have well understood the importance of having a detailed analysis of options in their recovery plans. Taking into account the good progress already made so far in providing a good range of credible and feasible recovery options that could restore the viability of an institution in a situation of financial distress, there are still areas for improvement and some specific issues that might need further developments.
In particular, the Report observed that the credibility and effectiveness of recovery plans could benefit greatly from a more detailed analysis of the links between recovery options and governance arrangements, and of the feasibility of options under each scenario. It should be noted that, while all plans provided a financial impact assessment on key supervisory ratios, a number of recovery plans did not provide enough information on the assumptions used to support the valuation of options. Finally, coverage and integration of material legal entities seems to be still a challenging task across the majority of recovery plans.
This analysis will feed into the policy recommendations on the coverage of entities in banking group recovery plans that the EBA is currently consulting on.
Notes to editors
In accordance with its role in contributing to effective recovery and resolution planning, the EBA has conducted a fourth thematic comparative analysis on 23 recovery plans across the EU with a focus on recovery options.
For a recovery plan to be effective, among other things, it should also provide a good range of recovery options that could restore the viability of the bank or of the group in situation of financial distress. For this reason, a comprehensive analysis of the various measures available to a bank for this purpose is extremely important, since it provides information on the feasibility of the single recovery option and on the actual effectiveness of the overall recovery capacity.