EBA欧洲银行-EBA-Comparative-report-on-recovery-options-March-2017_43页_948kb

EBA Recovery Planning Comparative Report Summary

Core Content

This report is the fourth thematic comparative analysis conducted by the European Banking Authority (EBA) on recovery planning in the European banking sector. It focuses on the recovery options included in the recovery plans of 23 European cross-border banking groups, with parent institutions located in 12 different EU countries. The analysis aims to understand how institutions approach the requirements on recovery options set out in the Bank Recovery and Resolution Directive (BRRD) and its Delegated Regulation, as well as assess the credibility and feasibility of these options.

Main Points

1. Approach

• The study includes recovery plans submitted by 23 banking groups in the second half of 2016.
• The BRRD and Delegated Regulation require recovery plans to include a wide range of recovery options that are reasonably likely to be implemented quickly and effectively.
• The EBA evaluates the recovery options through three main sections:
  • Description and availability of recovery options
  • Financial and operational impact assessment
  • Credibility and feasibility of recovery options

2. Overview and Integration in Recovery Plans

• Description of Recovery Options:

  • Most plans included a description of recovery options, though the level of detail varied.
  • Plans with prior experience of implementing recovery options tended to provide more detailed descriptions.
  • Only one third of the plans provided a description of the selection criteria for recovery options.

• Recovery Options Included:

  • The most common recovery options were: disposal of subsidiaries, sale of assets/loan portfolios, liquidity improvement measures, and capital raising.
  • The number of recovery options varied from 8 to 56 across different plans.

• Availability at Subsidiary Level:

  • Around half of the recovery plans identified recovery options at the subsidiary level.
  • These options often involved capital/liquidity support from the parent entity.
  • None of the institutions had structured intra-group support agreements in line with Article 19 of the BRRD, though some were considering doing so.

• Governance, Decision Making, and Implementation:

  • Governance arrangements for recovery options were specified in about half of the plans.
  • Some plans referred to internal handbooks without providing detailed procedures.
  • Clear governance is essential to ensure the timely and effective implementation of recovery options, especially in times of financial stress.

• Interaction with Recovery Scenarios:

  • Most plans specified the suitability of recovery options under stressed scenarios.
  • However, many lacked detailed assessments of feasibility under each scenario.
  • Some plans tested all recovery options in a scenario, while others did not, raising concerns about the usefulness of untested options.

• Prioritization of Recovery Options:

  • Roughly one third of the plans ranked recovery options by priority.
  • Only a few included detailed methodologies for prioritization, while most provided general statements.

3. Impact Assessment

• Financial Impact:

  • Almost all plans provided figures on the financial impact of recovery options on key capital and liquidity metrics.
  • However, the level of detail behind the assumptions was often limited.
  • Many plans used the same assumptions for all scenarios, reducing the credibility of the impact assessments.

• Operational Impact:

  • The majority of plans considered the impact of recovery options on operational continuity, critical functions, and core business lines.
  • Only about one third included detailed information on operational impact and continuity.
  • The explanation of operational continuity was often general, with no specific mention of whether it was warranted for each recovery option.

4. Credibility and Feasibility

• Previous Experience:

  • Many institutions referenced past experiences in their recovery plans, but additional details on how these experiences were used were often missing.

• Timeline for Execution:

  • All banks estimated timeframes for executing recovery options.
  • However, few provided sufficient explanation to assess the realism and conservativeness of these timelines.

• Potential Impediments:

  • The majority of banks identified potential risks and impediments to the execution of recovery options.
  • However, many plans outlined only generic mitigating actions and preparatory measures, which limited evidence of their effectiveness.

Key Information

• Regulatory Context:

  • The BRRD requires recovery plans to include a wide range of recovery options that are reasonably likely to be implemented quickly and effectively.
  • The Delegated Regulation (EU) 1075/2016 outlines specific requirements for the inclusion of recovery options in plans.

• Challenges Identified:

  • Integration and Consistency: Limited integration of recovery options at the subsidiary level and within the group.
  • Feasibility Assessment: Inadequate detail in feasibility and impact assessments, especially under different stress scenarios.
  • Governance Clarity: Lack of detailed governance procedures in many plans.
  • Credibility of Timelines: Insufficient explanation of the estimated timelines for recovery option execution.
  • Specificity of Mitigating Actions: Generic mitigating actions and preparatory measures were often provided, limiting their effectiveness.

• Recommendations:

  • Institutions should provide more detailed descriptions of recovery options, including their selection criteria and suitability under different scenarios.
  • Governance procedures should be clearly defined and specific to each recovery option.
  • Impact assessments should include varied assumptions and detailed reasoning.
  • Timelines and mitigating actions should be more transparent and realistic.

Conclusions

The EBA highlights that while recovery planning has advanced since the implementation of the BRRD, several challenges remain in ensuring the credibility and feasibility of recovery options. These include limited integration at the subsidiary level, insufficient detail in impact assessments, and unclear governance and implementation procedures. The report supports supervisors in identifying the crucial elements of recovery plans and assists resolution authorities in developing effective resolution strategies.