The Bank Recovery and Resolution Directive (BRRD) mandates the European Banking Authority (EBA) to develop draft regulatory technical standards (RTS) on the minimum elements to be included in a business reorganisation plan (the Plan) and on the minimum content of the implementation reports, and the guidelines on the criteria for the assessment of the Plan by the resolution authority, in agreement with the competent authority.
The EBA has now published a consultation paper containing draft RTS and draft guidelines for Plans. The draft RTS require that the Plan identify the causes of the failure, address them and show that the institution can operate viably in the long-term. The reorganisation strategy should rely on prudent assumptions and the relevant market and macro-economic situation. The Plan should include projections on the financial performance of the institution during the reorganisation period with relevant milestones and indicators for a base-case, as well as best- and worst-case scenarios. The institution should regularly report the implementation of the Plan to the resolution authority through progress reports.
The draft guidelines require that the authorities assess the credibility of the Plan and its assumptions, as well as the appropriateness of the strategy and measures. The authorities should also ensure that the Plan is consistent with other public policy objectives. Other relevant EU rules that may be applicable in the event of a resolution, such as State aid rules, should be taken into account when assessing the Plan. The draft guidelines include provisions for the coordination between the resolution and competent authorities when assessing the Plan and progress report.
The EBA is enquiring in the consultation as to whether the resolution authority should apply certain relevant provisions of the RTS and the draft guidelines when using the bridge institution tool, in order to avoid that application of that tool circumventing the requirements of viability and operation of an institution resulting from the resolution.
The deadline for comments on the consultation paper is 9 June 2015.
According to the BRRD, the EBA may also specify further in RTS the criteria to be fulfilled by the Plan, in order to be approved, taking into account the experience acquired in the application of the draft guidelines. However, this is not part of the work covered by the consultation paper.
View EBA defines requirements for business reorganisation plans, 9 March 2015