On 23 July 2020, the PRA published Consultation Paper 10/20: Simplified Obligations for recovery planning (CP10/20). In CP10/20 the PRA sets out a proposal to allow certain firms to benefit from Simplified Obligations for recovery planning (Simplified Obligations), in light of the discretion it has under Article 4(1) of the Bank Recovery and Resolution Directive (BRRD) as to whether to apply Simplified Obligations.

Under Article 4 of the BRRD, the PRA has discretion to apply Simplified Obligations for firms where their failure is not expected to have a ‘significant negative effect on financial markets, on other institutions, on funding conditions, or on the wider economy’, taking account of the other criteria set out in Article 4(1). Simplified Obligations enables the PRA and the Bank of England to decide on the level of detail of firms’ recovery and resolution planning respectively.

The PRA has identified two instances where Simplified Obligations could be applied to those firms that are deemed eligible. For those firms, the proposals seek to reduce the minimum number of scenarios considered in recovery planning to two, and clarify that firms that are eligible for Simplified Obligations are not expected to submit the information template in Supervisory Statement 9/17 ‘Recovery planning’ (SS9/17).

In CP10/20 the PRA proposes to change SS9/17 that would reduce expectations for certain firms’ recovery planning. The firms concerned would be notified by the PRA that they are eligible for Simplified Obligations.

The deadline for comments on CP10/20 is 23 October 2020.

The PRA intends to publish a final policy statement and to notify firms that are eligible for Simplified Obligations in H2 2020. Pending consideration of the responses to CP10/20, the amendments to SS9/17 would apply with immediate effect once the final policy statement is published.