Commission Delegated Regulation (EU) 2016/1075Show full title

SECTION III U.K. Assessment of recovery plans

Article 16 U.K. Completeness of recovery plans

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:

(a)

obstacles to implementing recovery measures within the group, including at the level of individual entities covered by the plan;

(b)

substantial practical or legal impediments to the prompt transfer of own funds or the repayment of liabilities or assets within the group.

Article 17 U.K. Quality of recovery plans

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:

(a)

the plan is self-explanatory and is drafted in clear and understandable language;

(b)

definitions and descriptions are clear and consistent throughout the plan;

(c)

assumptions and valuations made within the plan are explained;

(d)

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:

(a)

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;

(b)

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:

(a)

in the case of an individual recovery plan, if there is internal consistency of the plan itself;

(b)

in the case of a group recovery plan, if there is internal consistency of the group plan itself;

(c)

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.

Article 18 U.K. Implementation of the arrangements proposed in the recovery plans

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.

Article 19 U.K. Recovery options

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.

Article 20 U.K. Specific requirements for group recovery plans

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:

(a)

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;

(b)

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;

(c)

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.

Article 21 U.K. Nature of the entity or entities being assessed

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.