The Bank Recovery and Resolution (No. 2) Order 2014

CHAPTER 1 U.K. Assessment of recovery plan drawn up by an institution

Application and interpretation of Chapter 1 U.K.

11.—(1) This Chapter applies where an institution—

(a) is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with [F1 the capital requirements regulation and CRR rules]; and

(b) submits a recovery plan to the appropriate regulator for assessment F2 ....

(2) In this Chapter “relevant measures” means measures to maintain or restore the viability and financial position of the institution, including measures to—

(a) reduce its risk profile, including its liquidity risk profile;

(b) review its structure and strategy;

(c) enable it to undertake timely recapitalisation;

(d) change its funding strategy in order to improve the resilience of core business lines and critical functions; and

(e) change its governance structure.

Textual Amendments

F1 Words in art. 11(1)(a) substituted (1.1.2022) by The Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021 (S.I. 2021/1376), regs. 1(3), 19(3)

F2 Words in art. 11(1)(b) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 7(2)(b); 2020 c. 1, Sch. 5 para. 1(1)

Assessment of plan U.K.

12.—(1) The appropriate regulator must assess the recovery plan within six months beginning with the date on which it receives the plan.

F3 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The appropriate regulator must—

(a) send a copy of the recovery plan to the Bank; and

(b) have regard to any recommendations made by the Bank to address any course of action proposed in the plan which could have an adverse impact on the resolvability of the institution.

Textual Amendments

F3 Art. 12(2) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 8; 2020 c. 1, Sch. 5 para. 1(1)

Criteria for assessment U.K.

13.—(1) The appropriate regulator must assess whether the recovery plan meets the requirements of [F4 Schedule A1] and whether the arrangements proposed in the plan—

(a) would, if implemented, be reasonably likely to maintain or restore the viability and financial position of the institution; and

(b) would be reasonably likely to be implemented quickly and effectively in situations of financial stress and, as far as possible, without any material adverse impact on the financial system of the United Kingdom.

[F5 (1A) The PRA and the FCA may each make technical standards relating to the criteria referred to in paragraph (1) for a recovery plan submitted by an institution that it has authorised.]

(2) In assessing the recovery plan against these criteria, the appropriate regulator must consider—

(a) any preparatory measures taken or planned to be taken by the institution;

(b) the possibility that the plan may have to be implemented at the same time as recovery plans drawn up by other institutions and group recovery plans; and

(c) whether the capital and funding structure of the institution is appropriate having regard to the level of complexity of its organisational structure and its risk profile.

(3) This article has effect subject to the imposition of any simplified obligations (within the meaning given by article 9(3)(a)) with respect to the recovery plan.

Textual Amendments

F4 Words in art. 13(1) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 9(2); 2020 c. 1, Sch. 5 para. 1(1)

F5 Art. 13(1A) inserted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 9(3); 2020 c. 1, Sch. 5 para. 1(1)

Revision of plan U.K.

14.—(1) The appropriate regulator—

(a) must notify the institution if, in its assessment, the recovery plan contains any material deficiency or measure which would impede its implementation; and

(b) may not require the institution to revise the recovery plan without giving it an opportunity to state its opinion on that requirement.

(2) If the appropriate regulator requires the institution to revise the recovery plan, it must allow the institution two months, which it may on application by the institution extend to three months, to prepare a plan which demonstrates that the deficiency or other impediment has been addressed.

Business changes and relevant measures U.K.

15.—(1) This article applies where—

(a) the institution fails to submit a revision of the recovery plan within the time allowed by the appropriate regulator; or

(b) the appropriate regulator considers that a matter notified under article 14(1) has not been adequately addressed in a revision of the plan and cannot be adequately addressed by directing the institution to make specific changes to the plan.

(2) The appropriate regulator must, in exercise of its powers under FSMA—

(a) direct the institution to propose changes to its business which would be made with the object of addressing a material deficiency or measure in the recovery plan which would impede its implementation; and

(b) if the institution fails to propose such changes to its business within the time allowed by the appropriate regulator or the appropriate regulator considers that any changes proposed would not adequately address the impediment, determine whether to direct the institution to take relevant measures.