The European Banking Authority (EBA) published revised guidelines on recovery plan indicators under the Bank Recovery and Resolution Directive (BRRD or Directive 2014/59/EU). The guidelines establish a common EU approach for developing the framework of recovery plan indicators, providing additional guidance on indicators’ calibration, monitoring, and breaches notifications. The revised guidelines retain most provisions of the existing guidelines, with the exception of replacing or adding a few metrics to the minimum list of recovery plan indicators and updating the format of the existing text to the current legal template for EBA guidelines.
EBA first issued the guidelines on recovery plan indicators in 2015 and decided to amend them based on practical experience acquired in recovery planning. The existing guidelines have been expanded in the following areas:
- Calibration of recovery plan indicators. Additional guidance is provided to institutions on the general principles to follow in setting the thresholds of recovery plan indicators, focusing on the treatment of recovery plan indicators in a crisis, in particular in the case of the application of supervisory relief measures. The guidelines clarify that, in the case of a systemic crisis, there should not be automatic recalibration of recovery plan indicators due to supervisory relief measures, unless it is duly justified and agreed with the competent authority.
- Actions and notifications upon a recovery plan indicator breach and monitoring of recovery plan indicators. The guidelines recognize the importance of timely notification of recovery plan indicator breaches and of frequent monitoring of indicators in a situation of crisis for the institution and the competent authority.
The guidelines specify the minimum list of categories of recovery plan indicators that should be covered (capital, liquidity, profitability, and asset quality indicators) plus two other categories (market-based and macroeconomic indicators) to be included, unless the institution justifies to the competent authorities that they are not relevant to its legal structure, risk profile, size and/or complexity. Limited amendments have been introduced minimum list of indicators. One indicator—cost of wholesale funding—has been removed while three new recovery indicators have been added to the minimum list of recovery indicators—minimum requirements for own funds and eligible liabilities/total loss-absorbing capacity, asset encumbrance, and liquidity position. The revised guidelines will apply from two months after the publication in all European Union languages. The 2015 guidelines on recovery plan indicators will be repealed at the same time.
Keywords: Europe, EU, Banking, BRRD, Recovery Planning, MREL, TLAC, Basel, Resolution Framework, Asset Encumbrance, Regulatory Capital, EBA
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