EBA Recommends Proportionate Approach in Entity Coverage Recovery Plan
EBA published its final recommendation on the coverage of entities in banking group recovery plans. This recommendation is addressed to both competent authorities and institutions and it aims to define common criteria to identify entities that need to be covered in group recovery plans, along with the extent of such coverage.
EBA recommends that the coverage of entities in a group recovery plan be proportional to the relevance of the entities. For recovery planning, entities should, therefore, be categorized as (i) relevant for the group, (ii) relevant for the economy or financial system of a relevant member state, or (iii) not relevant for either of the two. Different levels of information are identified for each category. The recommendation also provides for an adjustment phase to ensure the smooth migration of recovery planning information currently available at the local level to the group level.
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). However, 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 to provide a common guidance to home and host supervisors, helping them to ensure a smooth process in joint decisions.
Related Link: EBA Recommendation (PDF)
Keywords: Europe, EU, Banking, Recovery Planning, CRD, BRRD, Proportionality, EBA
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