Recovery Plans

1.1

Unless otherwise stated, this Part applies to a BRRD undertaking.

1.2

In this Part, the following definitions shall apply:

Article 1(1)(b) entity

means a financial institution that is established in an EEA State when the financial institution is a subsidiary of a credit institution or investment firm, or of an Article 1(1)(c) entity or an Article 1(1)(d) entity, and is covered by the supervision of the parent undertaking on a consolidated basis in accordance with Articles 6 to 17 of CRR.

Article 1(1)(c) entity

means a financial holding company, mixed financial holding company or mixed activity holding company that is established in an EEA State.

Article 1(1)(d) entity

means a parent financial holding company in an EEA State, an EEA parent financial holding company, a parent mixed financial holding company in an EEA State or an EEA parent mixed financial holding company.

competent authority

means a public authority or body officially recognised by national law which is empowered by national law to supervise institutions as part of the supervisory system in operation in the EEA State concerned or the European Central Bank with regard to the specified tasks conferred on it by Article 4 of Council Regulation (EU) No. 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions.

conditions for early intervention

means where an institution infringes or is likely in the near future to infringe the requirements of the CRR, CRD, MiFID II or any of Articles 3 to 7, 14 to 17 and 24, 25 and 26 of MiFIR.

EEA consolidating supervisor

means a competent authority responsible for the exercise of supervision on a consolidated basis of:

1. (1) an EEA parent institution; or
2. (2) institutions controlled by an EEA parent financial holding company or an EEA parent mixed financial holding company.

EEA parent financial holding company

means a parent financial holding company in an EEA State which is not a subsidiary of an institution authorised in any EEA State or of another financial holding company or mixed financial holding company set up in any EEA State.

EEA parent institution

means a parent institution in an EEA State which is not a subsidiary of another institution authorised in an EEA State or of a financial holding company or mixed financial holding company set up in any EEA State.

EEA parent mixed financial holding company

means a parent mixed financial holding company in an EEA State which is not a subsidiary of an institution authorised in any EEA State or of another financial holding company or mixed financial holding company set up in any EEA State.

EEA parent undertaking

means an EEA parent institution, an EEA parent financial holding company or an EEA parent mixed financial holding company.

extraordinary public financial support

means State aid, or any other public financial support at supra-national level, which, if provided for at national level, would constitute State aid, that is provided in order to preserve or restore the viability, liquidity or solvency of an institution or Article 1(1)(b) entity, Article 1(1)(c) entity, Article 1(1)(d) entity or of a group of which such an institution or entity forms part.

group recovery plan

means a group recovery plan drawn up by a BRRD undertaking in accordance with Chapter 3.

management body

means a BRRD undertaking’s body or bodies, which are appointed in accordance with national law, which are empowered to set the BRRD undertaking’s strategy, objectives and overall direction, and which oversee and monitor management decision-making, and include the persons who effectively direct the business of the BRRD undertaking.

own funds requirement

means the requirements laid down in Articles 92 to 98 of the CRR.

parent financial holding company in an EEA State

means a financial holding company which is not itself a subsidiary of an institution authorised in the same EEA State, or of a financial holding company or mixed financial holding company set up in the same EEA State.

parent mixed financial holding company in an EEA State

means a mixed financial holding company which is not itself a subsidiary of an institution authorised in the same EEA State, or of a financial holding company or mixed financial holding company set up in the same EEA State.

parent institution in an EEA State

means an institution authorised in an EEA State which has an institution or financial institution as a subsidiary or which holds a participation in such an institution or financial institution, and which is not itself a subsidiary of another institution authorised in the same EEA State or of a financial holding company or mixed financial holding company set up in the same EEA State.

parent undertaking

has the meaning given in Article 4(1)(15) of the CRR.

recovery plan

means a recovery plan drawn up by a firm in accordance with 2.

significant branch

means a branch of an institution that would be designated as being significant in accordance with Article 51(1) of the CRD.

State aid

means any aid granted by an EEA State or through an EEA State’s resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, and which affects trade between EEA States.

1.3

Unless otherwise defined, any italicised expression used in this Part and in the CRR has the same meaning as in the CRR.

2.1

This Chapter applies to a firm that is not part of a group subject to consolidated supervision pursuant to Articles 111 and 112 of the CRD.

[Note: Art. 5(1) of the BRRD]

2.2

A firm must draw up and maintain a recovery plan providing for measures to be taken by the firm to restore its financial position following a significant deterioration of its financial situation.

[Note: Art. 5(1) of the BRRD]

2.3

A firm must submit its recovery plan to the PRA.

[Note: Art. 6(1) of the BRRD]

2.4

A firm must provide its recovery plan to the PRA by online submission through:

1. (1) email; or
2. (2) the appropriate systems made available to firms.

2.5

A recovery plan must not assume any access to or receipt of extraordinary public financial support.

[Note: Art. 5(3) of the BRRD]

2.6

A recovery plan must include, where applicable, an analysis of how and when the firm may apply, in the conditions addressed by the plan, for the use of central bank facilities and must identify those assets which would be expected to qualify as collateral.

[Note: Art. 5(4) of the BRRD]

2.7

The recovery plan must include the information set out in Section A of the Annex to the BRRD.

[Note: Art. 5(5) of the BRRD]

2.8

A recovery plan must include possible measures which could be taken by the firm where the conditions for early intervention are met.

[Note: Art. 5(5) of the BRRD]

2.9

A recovery plan must include appropriate conditions and procedures to ensure the timely implementation of recovery actions as well as a wide range of recovery options.

[Note: Art. 5(6) of the BRRD]

2.10

A recovery plan must contemplate a range of scenarios of severe macroeconomic and financial stress relevant to the firm’s specific conditions including system-wide events and stress specific to individual legal persons and to groups.

[Note: Art. 5(6) of the BRRD]

2.11

A firm must demonstrate to the PRA that the recovery plan meets the requirements set out in this Chapter and the following criteria:

1. (1) the implementation of the arrangements proposed in the recovery plan is reasonably likely to maintain or restore the viability and financial position of the institution or of the group, taking into account the preparatory measures that the institution has taken or has planned to take;
2. (2) the recovery plan and specific options within the recovery plan are reasonably likely to be implemented quickly and effectively in situations of financial stress and avoiding to the maximum extent possible any significant adverse effect on the financial system, including in scenarios which would lead other institutions to implement recovery plan within the same period.

[Note: Art. 6(1) of the BRRD]

3.1

This Chapter applies to a BRRD undertaking which is:

1. (1) an EEA parent undertaking unless the FCA is the EEA consolidating supervisor of its group; or
2. (2) a firm controlled by an EEA parent financial holding company or an EEA parent mixed financial holding company if:
1. (a) the EEA parent financial holding company or EEA parent mixed financial holding company is not incorporated in the UK and does not have a place of business in the UK; and
2. (b) the PRA is the EEA consolidating supervisor of the firm.

3.2

If the EEA consolidating supervisor is the PRA, a BRRD undertaking must draw up a group recovery plan and submit the group recovery plan to the PRA. If the EEA consolidating supervisor is not the PRA, a BRRD undertaking that is a qualifying parent undertaking must make arrangements to ensure that a group recovery plan is drawn up and submitted to the EEA consolidating supervisor.

[Note: Art. 7(1) of the BRRD]

3.3

The group recovery plan must consist of a recovery plan for the group headed by the EEA parent undertaking as a whole.

[Note: Art. 7(1) of the BRRD]

3.4

A BRRD undertaking which is required by 3.2 to submit the group recovery plan to the PRA must provide its recovery plan to the PRA by online submission through:

1. (1) email; or
2. (2) the appropriate systems made available to BRRD undertakings.

3.5

The group recovery plan must identify measures that may be required to be implemented at the level of the EEA parent undertaking and each individual subsidiary.

[Note: Art. 7(1) of the BRRD]

3.6

The group recovery plan must aim to achieve the stabilisation of the group as a whole, or any institution of the group, when it is in a situation of stress so as to address or remove the causes of the distress and restore the financial position of the group or the institution in question, at the same time taking into account the financial position of other group entities.

[Note: Art. 7(4) of the BRRD]

3.7

The group recovery plan must include arrangements to ensure the coordination and consistency of measures to be taken at the level of the EEA parent undertaking, at the level of an Article 1(1)(c) entity or Article 1(1)(d) entity, as well as measures to be taken at the level of a subsidiary and, where applicable, in accordance with the CRD at the level of a significant branch.

[Note: Art. 7(4) of the BRRD]

3.8

The group recovery plan must include the elements specified in 2.6 – 2.9. The group recovery plan must include, where applicable, arrangements for intra-group financial support adopted pursuant to an agreement for intra-group financial support that has been concluded in accordance with Articles 19 – 26 of the BRRD or Group Financial Support 2 – 8.

[Note: Art. 7(5) of the BRRD]

3.9

The group recovery plan must include a range of recovery options setting out actions to address a range of scenarios of severe macroeconomic and financial stress relevant to the group’s specific conditions including system-wide events and stress specific to individual legal persons and to groups.

[Note: Art. 7(6) of the BRRD]

3.10

For each scenario, the group recovery plan must identify whether there are obstacles to the implementation of recovery measures within the group, including at the level of individual entities covered by the plan, and 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.

[Note: Art. 7(6) of the BRRD]

3.11

A BRRD undertaking that is a firm must demonstrate to the PRA that the group recovery plan meets the requirements set out in this Chapter and the following criteria:

1. (1) the implementation of the arrangements proposed in the group recovery plan is reasonably likely to maintain or restore the viability and financial position of the group or of an individual subsidiary in the group, taking into account the preparatory measures that the individual subsidiary has taken or has planned to take; and
2. (2) the group recovery plan and specific options within the group recovery plan are reasonably likely to be implemented quickly and effectively in situations of financial stress and avoiding to the maximum extent possible any significant adverse effect on the financial system, including in scenarios which would lead other institutions to implement group recovery plans within the same period.

[Note: Art. 6(1) of the BRRD]

3.12

A BRRD undertaking that is a qualifying parent undertaking must make arrangements to ensure it is demonstrated to the EEA consolidating supervisor that the group recovery plan meets the requirements set out in this Chapter and the following criteria:

1. (1) the implementation of the arrangements proposed in the group recovery plan is reasonably likely to maintain or restore the viability and financial position of the group or of an individual subsidiary in the group, taking into account the preparatory measures that the individual subsidiary has taken or has planned to take; and
2. (2) the group recovery plan and specific options within the group recovery plan are reasonably likely to be implemented quickly and effectively in situations of financial stress and avoiding to the maximum extent possible any significant adverse effect on the financial system, including in scenarios which would lead other institutions to implement group recovery plans within the same period.

[Note: Art. 6(1) of the BRRD]

4.1

This Chapter applies to a BRRD undertaking which is required to draw up a recovery plan or group recovery plan under 2 or 3.

4.2

A BRRD undertaking that is a firm must:

1. (1) review its recovery plan or group recovery plan at least once a year; and
2. (2) keep its recovery plan or group recovery plan up to date, which includes ensuring that it is updated to reflect any change to the legal or organisational structure of the firm or group, its business or its financial situation, which could have a material effect on, or necessitates a change to, the recovery plan or group recovery plan.

[Note: Art. 5(2) of the BRRD]

4.3

A BRRD undertaking that is a qualifying parent undertaking must make arrangements to ensure that:

1. (1) its group recovery plan is reviewed at least once a year; and
   
   
2. (2) its group recovery plan is kept up to date, which includes ensuring that it is updated to reflect any change to the legal or organisational structure of the group, its business or its financial situation, which could have a material effect on, or necessitates a change to, the group recovery plan.

[Note: Art. 5(2) of the BRRD]

4.4

A firm must notify the PRA of any material changes made to its recovery plan promptly and, in any event, within one month of making any such change.

4.5

A BRRD undertaking which is required by 3.2 to submit a group recovery plan to the PRA must notify the PRA of any material changes made to its group recovery plan promptly and, in any event, within one month of making any such change.

5.1

This Chapter applies to a BRRD undertaking which is required to draw up a recovery plan or a group recovery plan under 2 or 3.

5.2

A firm which is required to draw up a recovery plan must, taking into account the nature, scale and complexity of its business, establish and maintain appropriate internal processes regarding the governance of its recovery plan and must:

1. (1) ensure that its management body oversees, assesses and approves the recovery plan before the firm submits the recovery plan to the PRA;
2. (2) ensure that its audit committee periodically reviews the recovery plan; and
3. (3) nominate an executive director who is a member of the firm’s management body to have responsibility for the recovery plan and for overseeing the internal processes regarding its governance.

5.3

A BRRD undertaking which is required to draw up a group recovery plan must, taking into account the nature, scale and complexity of its business and the business of other members of its group, establish and maintain appropriate internal processes regarding the governance of the group recovery plan and must:

1. (1) ensure that its management body oversees, assesses and approves the group recovery plan before the BRRD undertaking submits the group recovery plan to the EEA consolidating supervisor;
2. (2) ensure that its audit committee periodically reviews the group recovery plan; and
3. (3) nominate an executive director who is a member of the BRRD undertaking’s management body to have responsibility for the group recovery plan and for overseeing the internal processes regarding its governance.

[Note: Art. 5(9) and 7(7) of the BRRD]

6.1

This Chapter applies to a BRRD undertaking which is required to draw up a recovery plan or group recovery plan under 2 or 3.

6.2

A recovery plan and a group recovery plan must include a framework of indicators established by the BRRD undertaking which identifies the points at which appropriate actions referred to in the recovery plan or group recovery plan may be taken.

[Note: Art. 9(1) of the BRRD]

6.3

The indicators may be of a qualitative or quantitative nature relating to the firm’s or the group’s financial position and must be capable of being monitored easily.

[Note: Art. 9(1) of the BRRD]

6.4

A BRRD undertaking must have in place appropriate arrangements for the regular monitoring of the indicators.

[Note: Art. 9(1) of the BRRD]

6.5

A firm must notify the PRA without delay if it decides to take action under its recovery plan or group recovery plan or if it decides to refrain from taking action.

[Note: Art. 9(1) of the BRRD]

6.6

A BRRD undertaking that is a qualifying parent undertaking must:

1. (1) notify the PRA without delay if it (or any member of its group) decides to take action under the group recovery plan or to refrain from taking action and the PRA is the EEA consolidating supervisor; and
2. (2) make arrangements to ensure the EEA consolidating supervisor is notified without delay if it (or any member of its group) decides to take action under the group recovery plan or to refrain from taking action and the PRA is not the EEA consolidating supervisor.