July 04, 2018

ECB published a report that presents its lessons learned and the best practices observed after three successive cycles of recovery plan assessments. ECB performed comprehensive benchmarking analyses that were used to identify the lessons learned and best practices presented in this report. A key conclusion of the benchmarking analyses was that recovery plans are not always operational during a stress situation and, thus, their usability could be improved.

The report first presents the experience of ECB on how banks could improve their presentation of recovery options, including the impact and feasibility assessments, and provides some examples of best practices. deals with overall recovery capacity (ORC). Although the relevant Commission Delegated Regulation requires that banks present a credible overview of their recovery capacity in their recovery plans, the experience of ECB has shown that banks tend to overstate their ORC. To address this issue, the report then presents possible elements that banks could take into account when estimating their ORC, including examples of best practices. Next, the report elaborates on how banks could select their set of recovery indicators and calibrate their capital and liquidity indicators, also including some examples of good practices. Finally, the report focuses on making the recovery plans easier to use and presents two best practices that ECB considers useful for making recovery plans more operational: playbooks and dry runs.

The report is intended to help significant institutions further improve their plans and make them more operational. Accordingly, the report does not impose any additional requirements on banks, nor does it create new supervisory expectations. It makes reference to existing requirements only, as set by the Bank Recovery and Resolution Directive (BRRD), the relevant Commission Delegated Regulation, and the EBA guidelines. Overall, the report clarifies the supervisory experience in relation to certain recovery-plan-related requirements that have already been set by the existing legislation. It provides additional insights into a selection of practices adopted by some banks that may help other institutions further improve their recovery plans. The scope of the report is limited to significant institutions.

 

Related Link: Report on Recovery Plans (PDF)

Keywords: Europe, EU, Banking, BRRD, Recovery Planning, Best Practices, Significant Institutions, ECB

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