CHAPTER I

COMMON PROVISIONS AND RECOVERY PLANS
SECTION I

Common provisions

Subject matter
Article 1
This Regulation further specifies:
1. the information to be contained in an individual recovery plan and, in accordance with paragraphs 5 and 6 of Article 7 of Directive 2014/59/EU, in a group recovery plan;
2. the minimum criteria that the competent authority is to assess with regard to both individual and group recovery plans, in accordance with paragraph 8 of Article 6 of Directive 2014/59/EU;
3. the contents of resolution plans required for institutions that are not part of a group subject to consolidated supervision pursuant to Articles 111 and 112 of Directive 2013/36/EU, and the contents of resolution plans required for groups, in accordance, respectively, with Articles 10 and 13 of Directive 2014/59/EU;
4. the matters and criteria to be examined for the assessment of the resolvability of institutions or groups, provided for, respectively in paragraph 4 of Article 15, and paragraph 2 of Article 16 of the Directive 2014/59/EU;
5. the conditions set out in points (a), (c), (e) and (i) of Article 23(1) of Directive 2014/59/EU with regard to financial support by a group entity in accordance with Article 19 of that Directive;
6. the circumstances in which a person is independent from the resolution authority and the institution or entity referred to in point (b), (c) or (d) of paragraph 1 of Article 1 of Directive 2014/59/EU for the purposes of paragraph 1 of Article 36 of that Directive and of Article 74 thereof;
7. the list of liabilities to which the exclusion from the obligation to include the contractual term referred to in paragraph 1 of Article 55 of Directive 2014/59/EU applies and the contents of the contractual term required in that paragraph;
8. the procedures and contents relating to the notifications referred to in paragraph 1, 2 and 3 of Article 81 of Directive 2014/59/EU and to the notice of suspension referred to in Article 83 of that Directive;
9. detailed rules on setting up and operational functioning of the resolution colleges for the performance of the tasks referred to in paragraph 1 of Article 88 of Directive 2014/59/EU.
Points (1), (2), (3) and (4) above are subject to the application of any simplified obligations determined in accordance with Article 4 of Directive 2014/59/EU.

Definitions
Article 2
For the purposes of this Regulation, the following definitions apply:
1. ‘individual recovery plan’ means any of the following:
  1. a recovery plan drawn up in accordance with Article 5(1) of Directive 2014/59/EU by an institution that is not part of a group subject to consolidated supervision pursuant to Articles 111 and 112 of Directive 2013/36/EU;
  2. a recovery plan drawn up in accordance with Article 7(2) of Directive 2014/59/EU by a subsidiary of an EU parent undertaking;
2. ‘resolution strategy’ means a set of resolution actions provided for in a resolution plan or group resolution plan;
3. ‘preferred resolution strategy’ a resolution strategy capable of best achieving the resolution objectives set out in Article 31 of Directive 2014/59/EU given the structure and the business model of the institution or group, and the resolution regimes applicable to legal entities in a group;
4. ‘qualifying eligible liabilities’ means eligible liabilities which satisfy the conditions set forth in Article 45(4) of Directive 2014/59/EU in order to be included in the amount of own funds and eligible liabilities referred to in Article 45(1) of that Directive;
5. ‘single point of entry (SPE)’ means a resolution strategy involving the application of resolution powers by a single resolution authority at the level of a single parent undertaking or of a single institution subject to consolidated supervision;
6. ‘multiple point of entry (MPE)’ means a resolution strategy involving the application of resolution powers by two or more resolution authorities to regional or functional subgroups or entities of a group;
7. ‘control’ means control as defined in point (37) of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council ;
8. ‘qualifying holding’ means a qualifying holding as defined in point (36) of Article 4(1) of Regulation (EU) No 575/2013.
SECTION II

Content of recovery plans

Information to be included in a recovery plan
Article 3
A recovery plan shall include at least the following items:
1. a summary of the key elements of the recovery plan, in accordance with Article 4;
2. information on governance, in accordance with Article 5;
3. a strategic analysis, in accordance with Articles 6 to 12;
4. a communication and disclosure plan, in accordance with Article 14;
5. an analysis of preparatory measures, in accordance with Article 15.

Summary of the key elements of the recovery plan
Article 4
1
The summary of the key elements of the recovery plan shall cover summaries of each of the following:
a
the recovery plan's information on governance;
b
the recovery plan's strategic analysis, including a summary of overall recovery capacity referred to in Article 12(3);
c
any material changes to the institution, group or recovery plan since the previous version of the recovery plan submitted to the competent authority;
d
the recovery plan's communication and disclosure plan;
e
the preparatory measures set out in the recovery plan.
2
For the purposes of Sections II and III of Chapter I of this Regulation, material change means any change which could impact the ability of an institution or of an EU parent undertaking or one or more of its subsidiaries to implement a recovery plan or to implement one or more recovery options contained in a recovery plan.

Governance
Article 5
The information on governance shall contain at least a detailed description of the following matters:
1. how the recovery plan was developed, including at least:
  1. the role and function of persons responsible for preparing, implementing and updating each section of the plan;
  2. the identity of the person who has overall responsibility for keeping the recovery plan up-to-date and a description of the process to be used for updating the recovery plan to respond to any material changes affecting the institution or group or their environment;
  3. a description of how the plan is integrated in the corporate governance of the institution or group and in the overall risk management framework;
  4. if the considered entity is part of a group, a description of the measures and arrangements taken within the group to ensure the coordination and consistency of recovery options at the level of the group and of individual subsidiaries;
2. the policies and procedures governing approval of the recovery plan, including at least:
  1. a statement whether the recovery plan has been reviewed by an internal audit function, external auditor or risk committee;
  2. confirmation that the recovery plan has been assessed and approved by the management body of the institution or EU parent undertaking responsible for submitting the plan;
3. the conditions and procedures necessary to ensure the timely implementation of recovery options, including, at least:
  1. a description of the internal escalation and decision-making process that applies when the indicators have been met, to consider and determine which recovery option may need to be applied in reaction to the situation of financial stress that has materialised, including at least:
    1. the role and function of persons involved in this process, including a description of their responsibilities, or, where a committee is involved in the process, the role, the responsibilities and function of committee members;
    2. the procedures that need to be followed;
    3. the time limit for the decision on taking recovery options and when and how the relevant competent authorities will be informed of the fact that the indicators have been met;
  2. a detailed description of the indicators, reflecting possible vulnerabilities, weaknesses or threats to, as a minimum, the capital position, liquidity situation, profitability and risk profile of the entity or entities covered in the recovery plan;
4. the plan's consistency with the general risk management framework of the institution or group, including a description of the relevant benchmarks (early warning signals) used as part of the institution's or group's regular internal risk management process, where these benchmarks are useful to inform the management that the indicators could potentially be reached;
5. management information systems, including a description of arrangements in place to ensure that the information necessary to implement the recovery options is available for decision-making in stressed conditions in a reliable and timely way.

Strategic analysis
Article 6
1
The strategic analysis shall identify core business lines and critical functions and set out the key steps to maintaining those core business lines and critical functions in a situation of financial stress.
2
The strategic analysis shall include at least the following subsections:
a
a description of the entity or entities covered by the recovery plan, as set out in Article 7;
b
a description of recovery options, as set out in Articles 8 to 12.

The description of entities covered by the recovery plan
Article 7
1
The subsection of the strategic analysis describing the entity or entities covered by the recovery plan shall comprise the following information:
a
a general characterisation of the entity or entities covered by the recovery plan, including:
1. a description of their overall global business and risk strategy;
2. their business model and business plan, including a list of the main jurisdictions in which they are active, including through a legal entity or a branch meeting the conditions set out in paragraph 2;
3. their core business lines and critical functions;
4. the process and metrics for identifying their core business lines and critical functions;
b
a mapping of the core business lines and critical functions to the legal entities and branches meeting the conditions set out in paragraph 2;
c
a detailed description of the legal and financial structures of the entity or entities covered by the plan, including an explanation of intra-group interconnectedness with respect to any legal entities or branches meeting the conditions set out in paragraph 2 and in particular a description of the following:
1. all existing material intra-group exposures and funding relationships, capital flows within the entity or entities covered by the recovery plan, intra-group guarantees that are in place and intra-group guarantees that are expected to be in place when recovery action is required;
2. legal interconnectedness, which shall cover material legally binding agreements between entities of a group including, for example, the existence of domination agreements and profit and loss transfer agreements;
3. operational interconnectedness, which concerns functions that are centralised in one legal entity or branch and are important for the functioning of other legal entities, branches or the group, in particular centralised information technology functions, treasury functions, risk functions or administrative functions;
4. any existing group financial support agreements concluded in accordance with Article 19 of Directive 2014/59/EU including the parties to the agreement, the form of the financial support and the conditions associated with the provision of the financial support;
d
a description of external interconnectedness including at least:
1. significant exposures and liabilities to main counterparties;
2. significant financial products and services which are provided by the entity or entities covered by the recovery plan to other financial market participants;
3. significant services which third parties provide to the entity or entities covered by the recovery plan;
2
For the purposes of points (b) and (c) of paragraph 1, the reference to legal entities or branches shall be understood as a reference to legal entities or branches which:
a
substantially contribute to the profit of the entity or entities covered by the recovery plan or to their funding, or hold an important share of their assets, liabilities or capital;
b
perform key commercial activities;
c
centrally perform key operational, risk or administrative functions;
d
bear substantial risks that could, in a worst-case scenario, jeopardise the viability of the institution or group;
e
could not be disposed of or liquidated without likely triggering a major risk for the institution or group as a whole;
f
are important for the financial stability of at least one of the Member States in which they have their registered offices or operate.

Recovery options
Article 8
1
The subsection on recovery options shall include a list of all recovery options and a description of each option, as set out in Articles 9 to 12.
2
The subsection on recovery options shall set out a range of recovery options designed to respond to financial stress scenarios and which could reasonably be expected to contribute to maintaining or restoring the viability and financial position of the entity or entities covered by the recovery plan.
3
Each recovery option shall be described in a way that enables the competent authority to assess its impact and feasibility.
4
Recovery options shall include measures which are extraordinary in nature as well as measures that could also be taken in the course of the normal business of the entity or entities covered by the recovery plan.
5
Recovery options shall not be excluded for the sole reason that they would require a change to the current nature of the business of that entity or those entities.

Actions, arrangements and measures under recovery options
Article 9
1
Each recovery option shall indicate at least the following:
a
a range of capital and liquidity actions required to maintain or restore the viability and financial position of the entity or entities covered by the recovery plan which have as their primary aim ensuring the viability of critical functions and core business lines;
b
arrangements and measures the primary aim of which is to conserve or restore the institution's own funds or the group's consolidated own funds through external recapitalisations and internal measures to improve the capital position of the entity or entities covered by the recovery plan;
c
arrangements and measures to ensure that the entity or entities covered by the recovery plan have adequate access to contingency funding sources to ensure that they can carry on their operations and meet their obligations as they fall due;
d
arrangements and measures to reduce risk and leverage, or to restructure business lines including, where appropriate, an analysis of possible material divestment of assets, legal entities, or business lines;
e
arrangements and measures the primary aim of which is to achieve a voluntary restructuring of liabilities, without triggering an event of default, termination, downgrade or similar.
For the purposes of point (c), the measures shall include external measures and, where appropriate, measures that aim at reorganising the available liquidity within the group. The contingency funding sources shall include potential liquidity sources, an assessment of available collateral and an assessment of the possibility to transfer liquidity across group entities and business lines.
2
Where a recovery option does not include the actions, arrangements or measures set out in points (a) to (e) of paragraph 1, the subsection on recovery options shall contain a demonstration that those actions, arrangements or measures have been adequately considered by the institution, the Union parent undertaking or the subsidiary which drew up and submitted the plan.

Impact assessment
Article 10
Each recovery option shall contain an impact assessment that shall include, in particular, a detailed description of the processes for determining the value and marketability of the core business lines, operations and assets of the entity or entities to which the recovery option relates, and at least the following elements:
1. a financial and operational impact assessment which sets out the expected impact on solvency, liquidity, funding positions, profitability and operations of the entity or entities covered by the recovery plan; where relevant, the assessment shall clearly identify the different entities of the group which may be affected by the option or involved in its implementation;
2. an assessment of external impact and systemic consequences which sets out the expected impact on critical functions performed by the entity or entities, covered by the recovery plan, and the impact on shareholders, on customers, in particular depositors and retail investors, on counterparties and, where applicable, on the rest of the group;
3. the valuation assumptions and all other assumptions made for the purpose of the assessments in points (1) and (2), including assumptions about the marketability of assets or the behaviour of other financial institutions.

Feasibility assessment
Article 11
1
Each recovery option shall contain a feasibility assessment, which shall include at least:
a
an assessment of the risk associated with the recovery option, drawing on any experience of executing the recovery option or an equivalent measure;
b
a detailed analysis and description of any material impediment to the effective and timely execution of the plan and a description of whether and how such impediments could be overcome;
c
where applicable, an analysis of potential impediments to the effective implementation of the recovery option which result from the structure of the group or of intra-group arrangements, including whether there are substantial practical or legal impediments to the prompt transfer of own funds or the repayment of liabilities or assets within the group;
d
solutions to the potential impediments identified in points (b) and (c).
2
For the purposes of paragraph 1, a material impediment shall include any factor that could potentially negatively affect the timely execution of the recovery option including, in particular, legal, operational, business, financial, and reputational risks such as any risk of a credit rating downgrade.

Continuity of operations
Article 12
1
Each recovery option shall contain an assessment of how the continuity of operations will be ensured when implementing that option.
2
That assessment shall include an analysis of internal operations (for example, information technology systems, suppliers and human resources operations) and of the access of the entity or entities covered by the recovery plan to market infrastructure (for example, clearing and settlement facilities and payment systems). In particular, the assessment of operational contingency shall take into account:
a
any arrangements and measures necessary to maintain continuous access to relevant financial markets infrastructure;
b
any arrangements and measures necessary to maintain the continuous functioning of the operational processes of the entity or entities covered by the recovery plan, including infrastructure and IT services;
c
the expected time frame for the implementation and effectiveness of the recovery option;
d
the effectiveness of the recovery option, and the adequacy of indicators in a range of scenarios of financial stress which assesses the impact of each of these scenarios on the entity or entities covered by the recovery plan, in particular on their capital, liquidity, profitability, risk profile and operations.
3
That assessment shall identify the recovery option which could be appropriate in a specific scenario, the potential impact of the recovery option, its feasibility, including the potential impediments to its implementation, and the time frame required for its implementation.
On the basis of this information, the assessment shall describe the overall recovery capacity of the entity or entities covered by the recovery plan, being the extent to which the recovery options allow that entity or those entities to recover in a range of scenarios of severe macroeconomic and financial stress.

Cross references
Article 13
Where information set out in Article 7 has been submitted to resolution authorities pursuant to Article 11 of Directive 2014/59/EU, competent authorities may choose to accept cross references to that information as sufficient for meeting the requirement in Article 7 if they do not compromise the completeness and quality of the recovery plan, as required by Section III of Chapter I of this Regulation.

Communication and disclosure plan
Article 14
1
The communication and disclosure plan shall cover the following matters in detail:
a
internal communication, in particular to staff, works councils or other staff representatives;
b
external communication, in particular to shareholders and other investors, competent authorities, counterparties, financial markets, financial market infrastructure, depositors and the public, as appropriate;
c
effective proposals for managing any potential negative market reactions.
2
A recovery plan shall include, at least, an analysis of how the communication and disclosure plan would be implemented when one or more of the arrangements or measures set out in the recovery plan are implemented.
3
The communication and disclosure plan shall adequately consider any specific communication needs for individual recovery options.

Preparatory measures
Article 15
1
A recovery plan shall include an analysis of any preparatory measures that the entity or entities covered by it have taken or which are necessary to facilitate the implementation of the recovery plan or to improve its effectiveness together with a timeline for implementing those measures.
2
Such preparatory measures shall include any measures necessary to overcome impediments to the effective implementation of recovery options which have been identified in the recovery plan.
SECTION III

Assessment of recovery plans

Completeness of recovery plans
Article 16
The competent authority shall assess the extent to which a recovery plan satisfies the requirements set out in Article 5 or Article 7 of Directive 2014/59/EU, respectively, and shall review the completeness of the plan based on the following:
1. whether the plan covers all the information listed in Section A of the Annex to Directive 2014/59/EU as further specified in Chapter I, Section I of this Regulation;
2. whether the plan provides information that is up to date, also with respect to any material changes to the entity or entities, in particular changes to their legal or organisational structure or their business or financial situation since the last submission of the plan, in accordance with Article 5(2) of Directive 2014/59/EU;
3. where applicable, whether the plan includes an analysis of how and when the entity or entities covered by the plan may apply, in the conditions addressed by the plan, for the use of central bank facilities and identify those assets which would be expected to qualify as collateral;
4. whether the plan adequately reflects an appropriate range of scenarios of severe macroeconomic and financial stress relevant to the specific conditions of the entity or entities that the plan covers, taking into account the guidelines issued by the EBA in accordance with Article 5(7) of Directive 2014/59/EU that further specify the range of scenarios to be used in recovery plans, by making every effort to comply with them in line with Article 16(3) of Regulation (EU) No 1093/2010;
5. whether the plan contains a framework of indicators which identifies the points at which appropriate actions referred to in the plan may be taken;
6. whether the information referred to in points (1) to (5) is provided in relation to the group as a whole;
7. whether the plan includes, where applicable, arrangements for intra-group financial support adopted pursuant to an agreement for group financial support that has been concluded in accordance with Chapter III of Directive 2014/59/EU;
8. whether for each of the scenarios of severe macroeconomic and financial stress which is reflected in the plan in accordance with Article 7(6) of Directive 2014/59/EU, the plan identifies whether there are:
  1. obstacles to implementing recovery measures within the group, including at the level of individual entities covered by the plan;
  2. substantial practical or legal impediments to the prompt transfer of own funds or the repayment of liabilities or assets within the group.

Quality of recovery plans
Article 17
In assessing the requirements and criteria set out in Article 5 and Article 7 of Directive 2014/59/EU, as applicable, the competent authority shall review the quality of a recovery plan based on the following:
1. the clarity of the plan is considered to be established if:
  1. the plan is self-explanatory and is drafted in clear and understandable language;
  2. definitions and descriptions are clear and consistent throughout the plan;
  3. assumptions and valuations made within the plan are explained;
  4. references to documents not contained in the plan and any annexes supplement the plan in a way which substantially contributes to identifying options to maintain or restore the financial strength and viability of the entity or entities that it covers;
2. the relevance of information contained in the plan is considered to be established if such information focuses on identifying options to maintain or restore the financial strength and viability of the institution or group;
3. the comprehensiveness of the recovery plan is considered to be established if, taking into account in particular the nature of the business of the entity or entities covered by the plan and their size and interconnectedness to other institutions and groups and to the financial system in general:
  1. the plan provides a sufficient level of detail concerning the information required to be included in recovery plans pursuant to Articles 5 and 7 of Directive 2014/59/EU;
  2. the plan contains a sufficiently wide range of recovery options and indicators, taking into account the guidelines issued by the EBA in accordance with Article 9(2) of Directive 2014/59/EU that further specify the indicators to be included in recovery plans, by making every effort to comply with them in line with Article 16(3) of Regulation (EU) No 1093/2010;
4. the internal consistency of the plan is considered to be established:
  1. in the case of an individual recovery plan, if there is internal consistency of the plan itself;
  2. in the case of a group recovery plan, if there is internal consistency of the group plan itself;
  3. where plans have been required for subsidiaries on an individual basis pursuant to Article 7(2) of Directive 2014/59/EU, there is internal consistency between these plans and the group recovery plan.

Implementation of the arrangements proposed in the recovery plans
Article 18
1
When assessing the extent to which the recovery plan satisfies the criterion set out in point (a) of Article 6(2) of Directive 2014/59/EU, the competent authority shall review the following:
a
the level of integration and consistency of the plan with the general corporate governance and the internal processes of the entity or entities to which the plan applies and its/their risk management framework;
b
whether the plan contains a sufficient number of plausible and viable recovery options which make it reasonably likely that the institution or group would be able to counter different scenarios of financial distress quickly and effectively;
c
whether recovery options included in the plan set out actions which effectively address the scenarios of severe macroeconomic and financial stress reflected in accordance with Article 5(6) of Directive 2014/59/EU;
d
whether the timeline for implementing the options is realistic and is taken into account in the procedures designed to ensure implementation of recovery actions;
e
the level of the institution's or group's preparedness to redress the situation of financial stress, as determined in particular by assessing whether the preparatory measures necessary have been adequately identified and, where appropriate, those measures have been implemented or a plan to implement them has been prepared;
f
the adequacy of the range of scenarios of severe macroeconomic and financial stress against which the plan has been tested;
g
the adequacy of the processes for testing the plan against the scenarios referred to in point (f) and the extent to which the analysis of recovery options and indicators in each scenario is verified by that testing;
h
whether the assumptions and valuations made within the plan and each recovery option are realistic and plausible.
2
The plausibility of each recovery option set out in the plan as referred to in point (b) of paragraph 1 shall be assessed taking into account all of the following elements:
a
the extent to which its implementation is within the institution's or group's control and the extent to which it would rely on action by third parties;
b
whether the plan includes a sufficiently wide range of recovery options and appropriate indicators, conditions and procedures to ensure timely implementation of these options;
c
the extent to which the plan considers reasonably foreseeable impacts of the implementation of the proposed recovery option on the institution or group;
d
whether the plan and in particular the recovery options would be likely to maintain the viability of the institution or group and restore its financial soundness;
e
if applicable, the extent to which the institution or group, or competitors with similar characteristics, have managed a previous episode of financial stress with similar characteristics to the scenario being considered by using the recovery options described, in particular as regards timely implementation of recovery options and, in the case of a group recovery plan, the coordination of recovery options within the group.

Recovery options
Article 19
When assessing the extent to which the recovery plan satisfies the criterion set out in point (b) of Article 6(2) of Directive 2014/59/EU, the competent authority shall review the following:
1. whether it is reasonably likely that the plan and individual recovery options can be implemented in a timely and effective manner even in situations of severe macroeconomic or financial stress;
2. whether it is reasonably likely that the plan and particular recovery options can be implemented to an extent which sufficiently achieves their objectives without any significant adverse effect on the financial system;
3. whether the range of recovery options sufficiently reduces the risk that obstacles to implementing those options or adverse systemic effects arise due to the recovery actions of other institutions or groups being taken at the same time;
4. the extent to which the recovery options may conflict with those of institutions or groups which have similar vulnerabilities, for example due to their similar business models, strategies or scope of activity, if the options were implemented at the same time;
5. the extent to which the implementation of recovery options by several institutions or groups at the same time is likely to negatively affect the impact and feasibility of those options.

Specific requirements for group recovery plans
Article 20
When assessing the extent to which a group recovery plan satisfies the criteria set out in Article 7(4) and (6) of Directive 2014/59/EU, the competent authority shall review the following:
1. the extent to which the plan can stabilise the group as a whole and any institution of the group, in particular taking into account:
  1. the availability of recovery options at the group level to restore where necessary the financial position of a subsidiary, without disturbing the group's financial soundness;
  2. whether, following the implementation of a particular recovery option, the group as a whole, and any institution within the group which would be intended to continue to carry on business under that recovery option, would still have a viable business model;
  3. the extent to which arrangements included in the plan ensure the coordination and consistency of measures to be taken at the level of the parent undertaking or of an institution subject to consolidated supervision pursuant to Chapter 3 of Title VII of Directive 2013/36/EU, or at the level of individual institutions, respectively. The extent to which governance processes included in the plan take into account the governance structure of individual subsidiaries and any relevant legal restrictions shall be reviewed in particular;
2. the extent to which the plan provides solutions to overcome any obstacles to the implementation of recovery measures within the group which are identified in relation to a scenario provided for in Article 5(6) of Directive 2014/59/EU; if the obstacles cannot be overcome, the extent to which alternative recovery measures could achieve the same objectives;
3. the extent to which the plan provides solutions to overcome any substantial practical or legal impediments to a prompt transfer of own funds or the repayment of liabilities or assets within the group which are identified; if the impediments cannot be overcome, the extent to which alternative recovery options could achieve the same objectives.

Nature of the entity or entities being assessed
Article 21
When assessing the overall credibility of a recovery plan in accordance with Articles 18, 19 and 20, the competent authority shall take into account the nature of the business of the entity or entities covered by the plan, their size and their interconnectedness to other institutions and groups and to the financial system in general.
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).