The European Banking Authority (EBA) has published a consultation paper containing draft Regulatory Technical Standards (RTSs) on the content of recovery plans under the draft Recovery and Resolution Directive (RRD).  This builds on the EBA Recommendation issued in January 2013 to foster the development of group recovery plans and their discussion within colleges of supervisors.  The EBA is to hold a public hearing on 30 April 2013, and responses to the consultation are sought by 11 June 2013.              

On 6 June 2012, the European Commission presented its proposal for the RRD with a view to establishing a framework for the recovery and resolution of credit institutions and investment firms, giving authorities prevention and early intervention powers, and resolution powers to ensure that if the financial situation of a bank deteriorates beyond repair, its critical functions can be rescued, and that the costs of restructuring and resolving failing banks fall upon the bank’s owners and creditors (not on taxpayers).

The RRD proposal would make the EBA responsible for:

  • drafting Technical Standards and Guidelines on matters such as the content and assessment of recovery and resolution plans (RRPs), the range of scenarios to be included in RRPs, design and implementation of resolution tools, conditions to trigger resolution, functioning of resolution colleges, etc;
  • participating in supervisory colleges and resolution colleges, to facilitate the adoption of joint decisions and to play a mediation role; and
  • providing for recognition of third country resolution proceedings and concluding non-binding framework cooperation arrangements with third countries.

Recovery plans should set out the arrangements and measures a bank would adopt to restore long-term financial viability in case of severe distress.  The draft RTS set out in the EBA’s consultation paper envisages that they should incorporate (both in respect of recovery plans developed at group and individual level) at least the following:

  • summary of the recovery plan
  • governance, including the conditions and procedures necessary to ensure a timely implementation of the recovery options
  • strategic analysis, including a description of the institution’s core business lines and critical functions together with the different recovery options designed to respond to financial stress scenarios
  • communication and disclosure plan, including external and internal communication arrangements
  • preparatory measures taken or to be taken to improve the implementation and effectiveness of the plan.

Because the text of the RRD is still being discussed by the EU legislators (European Parliament and Council), the draft RTS may need to be amended after the consultation to take into account possible changes in the final RRD.

The indicative date for the first reading of the RRD in plenary session of the European parliament is currently 10 June 2013.  The EBA will submit the final draft RTS on recovery plans within 12 months from the date of entry into force of the RRD.