European Banking Authority Report on Links Between Bank Recovery and Resolution Planning
05/20/2020The European Banking Authority has published a report on the links between recovery and resolution planning for EU credit institutions and investment firms subject to the EU Bank Recovery and Resolution Directive.
BRRD sets out the actions that must be taken where EU credit institutions and certain EU investment firms run into financial difficulty. Recovery and resolution are the BRRD “crisis preparation tools” designed, in the case of recovery, by the firm itself to help the firm recover from a severe stress scenario and, in the case of resolution, by the resolution authority where recovery is no longer viable and resolution action must be taken. The EBA notes that, while the two processes are separate, they are related and recovery may often lead to resolution. By assessing links between planning for each process, synergies could be maximized and material inconsistencies addressed to ensure a more effective application of the regime.
The purpose of the report is to: (i) identify best practices and areas for improvement in recovery and resolution planning; (ii) clarify the purpose of common elements found in both recovery and resolution plans and determine the advantages or disadvantages of convergence of these elements; (iii) facilitate assessments of the impact of recovery options on an institution’s resolvability; and (iv) set out future work the EBA may undertake in this area. In particular, the EBA’s future work may include further analysis on the potential implications of resolution plans (including removal of impediments to resolvability) on recovery planning and ways the EBA could improve operational aspects of linkages between recovery and resolution plans.
View the EBA's Report on Interlinkages between bank recovery and resolution.
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