Prudential Regulation Authority Rulebook

1.1

This supervisory statement (SS) sets out the Prudential Regulation Authority’s (PRA’s) expectations on the content of recovery plans and group recovery plans (jointly referred to as ‘recovery plans’).

1.2

The SS is relevant to UK banks, building societies, PRA-designated investment firms and qualifying parent undertakings (‘firms’) to which the Recovery Planning Part of the PRA Rulebook applies.

1.3

This SS complements and should be read in conjunction with:

• the Recovery Planning Part of the PRA Rulebook;
• the Commission Delegated Regulation (EU) 2016/1075;
• the European Banking Authority (EBA) ‘Guidelines on the range of scenarios to be used in recovery plans’;^[1]
• the EBA ‘Guidelines on the minimum list of qualitative and quantitative recovery plan indicators’;^[2]
• the EBA ‘Recommendation on the coverage of entities in a group recovery plan’;^[3] and
• the Commission Delegated Regulation (EU) 2019/348.

1.4

This SS reflects the PRA’s current expectations and may be revised as recovery planning becomes further embedded in firms’ risk management practices.

1.5

Recovery planning is a key component of the regulatory reform agenda introduced by the PRA following the financial crisis of 2007-2008. It addresses the risk that the management of firms concentrate disproportionately on growth opportunities at the expense of managing downside risk. It advances the PRA’s general objective to promote the safety and soundness of the firms it regulates.

1.6

The PRA expects firms to undertake recovery planning so that they are ready for periods of financial stress, can stabilise their financial position and can recover from financial losses. Firms should have a number of recovery options, and maintain and test their plans. Governance of the plan should be clearly defined and firms should have effective processes to identify and report the risks affecting their ability to recover. Recovery planning is a prescribed responsibility under the Senior Managers Regime^[4] and firms are responsible for their own recovery plans. This SS is designed to help firms with this work and sets out the PRA’s expectations.

1.7

Firms should not treat recovery planning as a regulatory compliance exercise. When the PRA assesses a recovery plan it focuses on: whether there is evidence that the plan could be used; whether a firm has realistically quantified the impact and timelines of specific recovery options; and whether the firm’s board and senior management can demonstrate how they would execute the plan.

1.8

Recovery plans should contain the information set out in the Recovery Planning Part and detailed in this SS. Subsidiaries of non-EU parents should follow the approach set out in Chapter 3.

1.9

The PRA recognises that some aspects of recovery planning are less developed across the industry than others, and it will take firms more time to meet the PRA’s expectations in these areas. Firms should therefore meet the following expectations^[5] by 30 June 2019:

• full separability analysis for disposal options (paragraph 2.30(i));
• modelling of capital and liquidity profiles in each scenario (paragraph 2.66);
• full analysis of funding needs by currency in each scenario (paragraph 2.68); and
• integration of liquidity contingency plans (contingency funding plans) (paragraph 2.93).

1.10

The PRA expects firms to meet all other expectations set out in the SS by 30 June 2018, or by the firm’s first annual update of their recovery plan following publication of this SS, whichever is later.