The EBA has conducted a thematic comparative analysis on recovery plans across the EU. The focus of the analysis has been on recovery plans’ scenario sections, since this area is crucial in order to assess the effectiveness of a recovery plan.
The ultimate objective of including scenarios in a recovery plan is not to predict which particular sequence of events could prompt financial distress. Rather, it should enable one to assess whether:
- the recovery options identified by the institution are robust enough to cope with a wide range of severe shocks;
- recovery indicators and trigger levels are appropriate and timely for these options to be executed.
The analysis shows that some institutions are already in line with the requirements of the BRRD and EBA regulatory products while others remain at a less advanced stage.
The report also makes some findings with regard to areas for improvement including (a) the relevance of scenarios was not always clear, (b) the description of the scenario and the impacts were not always sufficiently explained, (c) the depiction of events and impacts was often observed to be point-in-time and static, rather than in the form of a sequence of events, and (d) the implied link between a plan’s scenarios and its indicators and options was sometimes vague.