EN Official Journal of the European Union L 184/1

COMMISSION DELEGATED REGULATION (EU) 2016/1075

of 23 March 2016

supplementing Directive 2014/59/EU of the European Parltime and of the Council with regard to regulatory technical standards specifying the content of recovery plans, resolution plans and group resolution plans, the minimum criteria that the competent authority is to assess as regards recovery plans and group recovery plans, the conditions for group financial support, the requirements for independent valuers, the contractual recognition of write-down and conversion powers, the procedures and contents of notification requirements and of notice of suspension and the operational functioning of the resolution colleges

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council (1), and in particular Article 5(10), Article 6(8), Articles 10(9), 12(6), 15(4), 23(2), 36(14), 55(3), 82(3) and 88(7) thereof,

Whereas:

(1) The provisions in this Regulation are closely linked to each other, since they deal with the resolution framework set out by Directive 2014/59/EU from the planning stage of the recovery and resolution of an institution, through the early intervention phase, up until the moment of resolution action. To ensure coherence between those provisions, which should enter into force simultaneously and to facilitate the resolution process, there is a need for institutions, authorities and market participants, including investors that are non-Union residents, to have a comprehensive view and compact access to their obligations and rights. It is therefore desirable to include the relevant regulatory technical standards required by Directive 2014/59/EU in a single Regulation.

(2) Further to the definitions of Directive 2014/59/EU, some specific definitions to technical terms used are necessary.

(3) Uniform rules on the minimum information to be included in recovery plans should take into account but not preclude the competent authorities' powers to determine simplified obligations for certain institutions regarding the contents and details of recovery plans, in accordance with Article 4 of Directive 2014/59/EU.

(4) These uniform rules should further specify, without prejudice to any simplified obligations determined in accordance with Article 4 of Directive 2014/59/EU, the information to be contained in an individual recovery plan and, in accordance with Article 7(5) and (6) of that Directive, in a group recovery plan.

(5) It is essential that the information included in recovery plans be adequate and specific, depending on whether the recovery plans are drawn up by institutions which are not part of a group subject to consolidated supervision pursuant to Articles 111 and 112 of Directive 2013/36/EU of the European Parliament and of the Council (2), or are individual recovery plans, as provided for in Article 7(2) of Directive 2014/59/EU, or group recovery plans, as provided for in paragraphs 5 and 6 of Article 7 of Directive 2014/59/EU.

(6) To facilitate the internal structure of the recovery plans, the information requirements should be grouped under a number of sections, some of which should be divided into subsections as set out in this Regulation.

(7) To ensure that recovery plans can effectively be implemented, if necessary, in due time, it is essential to build those plans on a sound governance structure. The recovery plans should therefore contain a description of the specific governance arrangements involved. In particular, a plan should set out how it was developed, who approved it, and how it is integrated in the overall corporate governance of the institution or the group. Where relevant, the measures taken to ensure consistency between an individual recovery plan of a subsidiary, if applicable, and the group recovery plan should be described.

(8) Recovery plans are crucial for assessing the feasibility of recovery options. Therefore, a recovery plan should contain detailed information on the decision-making process with regard to its activation as an essential element of the governance structure, based on an escalation process using indicators within the meaning of Article 9 of Directive 2014/59/EU. Since each crisis is different, the materialisation of an indicator does not automatically activate a specific recovery option or, more generally, prompt an automated framework under which a particular recovery option has to be implemented in accordance with predetermined procedural requirements. Rather, indicators should be used to indicate that an escalation process should be started, involving an analysis of the best way to address a crisis situation. Before those indicators materialise, data and benchmarks used in regular risk management should be also applied to inform the institution or group of the risk of deterioration of its financial situation and of the indicators being triggered. While such early warning signals are not indicators within the meaning of Directive 2014/59/EU and as such do not indicate entry into the recovery phase or require escalation outside the business-as-usual processes, they help to ensure consistency between the institution's regular risk management and the monitoring of the indicators. The recovery plan should therefore contain a description of how suitable elements of the institution's risk management are connected with the indicators.

(9) The strategic analysis should take into account international standards for recovery plans such as the Financial Stability Board's ‘Key Attributes of effective resolution regimes for financial institutions’. According to the Key Attributes, the strategic analysis should identify the institution's essential and systemically important functions and set out the key steps to maintaining them in recovery scenarios. Accordingly, the strategic analysis should comprise two parts. The first part of the strategic analysis should describe the institution or the group and its core business lines and critical functions. The description of the institution or of the group should provide a general overview of the institution or of the group and of its activities, together with a detailed description of its core business lines and critical functions. In order to facilitate the assessment of recovery options such as divestments and sales of business lines, it is important to identify the legal entities in which core business lines and critical functions are located, and to analyse intra-group interconnectedness. Under Article 6(1) and (2) of Directive 2014/59/EU, institutions are required to demonstrate to the satisfaction of the competent authority that the recovery plan is reasonably likely to be implemented without causing any significant adverse effect on the financial system. In addition, Article 6(2) of Directive 2014/59/EU requires the competent authorities to evaluate the extent to which the recovery plan, or specific options within it, could be implemented without causing any significant adverse effect on the financial system. Recovery plans should therefore contain a description of external interconnectedness.

(10) The second part of the strategic analysis should identify and assess possible recovery options. Recovery options available to the institution or the group should initially be described without reference to a specific scenario of financial stress. These are a means to enhance general crisis-preparedness and assist the institution or the group in reacting flexibly to a crisis. The strategic analysis should then set out how recovery options have been tested against specific scenarios of financial stress in order to tentatively assess which recovery options would be efficient in each of these scenarios, thereby providing a practical test of the efficiency of recovery options and of the adequacy of the indicators. Recovery options should include measures which could be taken by the institution where the conditions for early intervention under Article 27 of Directive 2014/59/EU are met.

(11) Communication of the recovery plan is crucial to implementing it effectively and to avoiding adverse effects on the financial system. A recovery plan should therefore also contain a section on communication and disclosure to address both internal communication to relevant internal bodies and the institution or group's staff, and external communication.

(12) A recovery plan could imply changes to the business organisation of the institution, either to facilitate the update of the plan and its implementation in the future, to monitor indicators, or because the process has identified some impediments complicating the implementation of recovery options. Those organisational preparatory and follow-up actions to be taken by the institution or the group should be described in the recovery plan in order to facilitate effective assessment of whether its implementation is reasonably likely, and to facilitate monitoring of its implementation by the institution or the group, and by competent authorities.

(13) It is essential to specify the minimum criteria that a competent authority must take into consideration when assessing recovery plans drawn up by institutions as provided for in Article 6(2) and Article 8(1) of Directive 2014/59/EU.

(14) Article 16 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (3) empowers the European Banking Authority (EBA) to issue guidelines to ensure the common, uniform and consistent application of Union law and requires that competent authorities and financial institutions to which such guidelines are addressed make every effort to comply with such guidelines. Since Directive 2014/59/EU mandates the EBA to issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify further certain aspects of the Directive, competent authorities should take into account in accordance with that Article, the guidelines on scenarios for recovery planning and indicators to be included in recovery plans issued by EBA by making every effort to comply with those guidelines in line with Article 16(3) of Regulation (EU) No 1093/2010.

(15) The objective of recovery planning, as set out in Directive 2014/59/EU, is to identify options to maintain or restore the viability and financial position of an institution or group when it is subject to severe stress. The criteria for assessing a recovery plan should therefore seek to ensure that the plan is appropriate to the entities it covers and that the plan and the options identified in it are viable and can be implemented in due course. The exact matters that the competent authority must assess will depend on the content and extent of the recovery plan. Uniform rules concerning the minimum criteria to be assessed should be laid down in order to take into account the ability of competent authorities to impose simplified obligations for certain institutions regarding the contents and details of recovery plans, in accordance with Article 4 of Directive 2014/59/EU.

(16) Where appropriate, additional criteria should be specified that apply to the assessment of group recovery plans in order to reflect the additional requirements set out in Directive 2014/59/EU that apply to such plans.

(17) Recovery plans should be complete and contain all information required by Directive 2014/59/EU, including elements further specified in this Regulation. The plans should also be comprehensive, including sufficient detail and a sufficient range of options for the circumstances of the entity or entities they cover.

(18) Requirements for the content of resolution plans should take account of ongoing work to coordinate these developments at a global level through the Financial Stability Board.

(19) Standards for the content of resolution plans and the assessment of resolvability should be sufficiently flexible to take account of the circumstances of the institution or group being considered, to ensure that plans are targeted and useful for the implementation of resolution strategies.

(20) Resolution authorities should assess whether liquidation under normal insolvency procedures can credibly and feasibly achieve the resolution objectives. To do this they may need to draw on the relevant expertise of deposit guarantee schemes. The assessment of whether liquidation is feasible and credible does not exclude the need to assess whether the resolution objectives will be achieved to the same extent in liquidation in national insolvency proceedings, including that of minimising reliance on extraordinary financial support.

(21) Assessment of resolvability is an iterative process and is only possible on the basis of an identified preferred resolution strategy. Resolution authorities could conclude at the end of the process that an amended or wholly different strategy is more appropriate.

(22) Variants of the preferred strategy should also be considered in order to take account of circumstances which prevent implementation of the preferred resolution strategy, such as where a single point of entry strategy using the bail-in tool could no longer be feasible if losses exceed the eligible liabilities issued by the parent entity.

(23) Standards for group resolution plans and assessment of resolvability should allow a resolution strategy based on either of the stylised approaches provided by the Financial Stability Board and referred to in recital 80 of Directive 2014/59/EU. Namely, resolution strategies can involve a single resolution authority applying resolution tools at the holding or parent company level of a group (single point of entry), involve more than one resolution authority applying resolution tools in respect of more than one regional or functional subgroup or entity in a cross-border group (multiple point of entry); or can combine aspects of both.

(24) In any case, resolution planning and assessment of resolvability should take account of any supporting action required from resolution authorities other than those taking resolution action, for instance through provision of information, continued provision of critical shared services, or decisions to refrain from taking resolution action, taking into account the right of other resolution authorities to act on their own initiative if necessary to achieve domestic financial stability in the absence of effective action by lead resolution authorities.

(25) Section C of the Annex to Directive 2014/59/EU specifies a number of matters which must be considered in assessing the resolvability of an institution or group, but is not exhaustive and requires further specification.

(26) Pursuant to Article 32 of Directive 2014/59/EU, resolution action should only be taken when winding up an institution or group under normal insolvency proceedings would not be in the public interest, and therefore the assessment of resolvability should consider such winding up as an alternative to resolution action.

(27) Article 23(1) of Directive 2014/59/EU sets out various conditions which must be fulfilled to permit a parent institution, a Union parent institution and certain other entities in a group and their subsidiaries in other Member States or third countries that are institutions or financial institutions, on the basis of a group financial support agreement provided in Chapter III of that Directive, to provide financial support in the form of a loan, of provision of guarantees or of assets for use as collateral to another group entity that meets the conditions for early intervention. Pursuant to Article 25(2) of Directive 2014/59/EU, the competent authority of the group entity providing the support may prohibit or restrict the provision of the financial support.

(28) Having regard to the financial difficulties of the receiving entity and the condition that there must be a reasonable prospect that the financial support redresses these financial difficulties, a thorough analysis of capital and liquidity needs of the receiving entity and an analysis of the internal and external causes for the financial difficulties and of past, present and expected market conditions should be undertaken. This analysis should include measures planned for addressing the causes of the distress of the receiving entity which can efficiently support the restoration of its financial situation.

(29) The assessment of the various conditions falls in the responsibility of the entity providing the support (providing entity) and of the competent authority responsible for the providing institution. The assessment should take into account the risk of potential adverse developments. For a comprehensive assessment of the conditions that relate to the providing entity, the competent authority responsible for the providing entity should also take into account information and assessments provided by the competent authority responsible for the group entity receiving the financial support.

(30) The condition that the terms of the provision are in accordance with Article 19(7) of Directive 2014/59/EU should take into account the default risk of the receiving entity and the loss for the providing entity given a default of the receiving entity, based on a comparison of the situations following the support or, respectively, without granting it, and on full disclosure of the relevant information. Those terms should reflect the best interest of the providing entity as described in point (b) of Article 19(7), which stipulates that any direct or indirect benefits may be taken into account that may accrue to a party as a result of the provision of the financial support. This should be verified by a thorough analysis of costs and benefits for the providing entity and the group as a whole in these two scenarios.

(31) Financial support agreements and the provision of the group financial support may improve the resolvability of a group, for example if they are in line with the loss absorption mechanism provided by the resolution strategy. However, they may also impair the feasibility of the implementation of the chosen resolution strategy, for example if that strategy envisages a separation of different parts of the group. Therefore the assessment of the impact on resolvability should be based on the resolvability assessment, on the individual resolution plan, and, where applicable, on the group resolution plan as determined by the joint decision of resolution colleges.

(32) When carrying out their valuation tasks for the purposes of Article 36, including Article 49(3), and Article 74 of Directive 2014/59/EU it is necessary to ensure that independent valuers are not being influenced, and are not perceived to be influenced, by public authorities, including the resolution authority, or by the institution or entity referred to in point (b), (c) or (d) of Article 1(1) of that Directive.

(33) Accordingly, uniform rules should apply to determine the circumstances in which a person shall be considered independent from the relevant public authorities, including the resolution authority, and from the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU. Those rules should contain requirements as to the expertise and resources of the person concerned and their relation to the relevant public authorities, including the resolution authority, and the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU.

(34) Independence can be reinforced by conditions ensuring the adequacy of the expertise and resources of the independent valuer. More specifically it should be ensured that the independent valuer possesses the necessary qualifications, knowledge and expertise in all relevant subjects, in particular valuation and accounting in the context of the banking industry. It should also be ensured that the independent valuer holds, or has access to, sufficient human and technical resources to carry out the valuation. For that purpose, it could be appropriate to access sufficient human and technical resources by engaging staff or contractors from other valuation specialists or law firms or other sources, in relation to the carrying out of the valuation. Where staff or contractors are engaged to support the conduct of the valuation they should be subject to conflicts of interest verification so as to ensure that independence is not undermined. In all cases the independent valuer should remain responsible for the outcome of the valuation.

(35) Furthermore it should be ensured that the independent valuer is also capable of carrying out the valuation effectively without undue reliance on any relevant public authority, including the resolution authority, and the institution or entity referred to in point (b), (c) or (d) or Article 1(1) of Directive 2014/59/EU. However, the provision of instructions or guidance necessary to support the conduct of the valuation, for example in relation to the methodology provided pursuant to the Union legislation in the field of valuation for purposes relating to resolution, should not be seen as constituting undue reliance where such instructions are, or guidance is, considered necessary to support the conduct of the valuation. In addition, the provision of assistance, such as the provision by the institution or entity concerned of systems, financial statements, regulatory reports, market data, other records or other assistance to the independent valuer should not be prevented where, in the assessment of the appointing authority or such other authority as may be empowered to conduct this task in the Member State concerned, this is considered necessary to support the conduct of the valuation. In accordance with any procedures which may be put in place, the provision of instructions, guidance and other forms of support should be agreed on a case-by-case or pooled basis.

(36) The payment of reasonable remuneration and the reimbursement of reasonable expenses in connection with the valuation should not be prevented.

(37) Independence can be endangered if valuation is performed by a person who is employed by or affiliated to any relevant public authority, including the resolution authority, and the institution or entity referred to in point (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU even in cases where full structural separation to address threats such as self-review, self-interest, advocacy, familiarity, trust or intimidation has been established. Therefore, there is a need to ensure that appropriate legal separation is secured such that the independent valuer is not an employee or contractor of, nor in a group with, any relevant public authority, including the resolution authority, or the institution or entity concerned.

(38) It is also necessary to ensure that the independent valuer does not have any material interest in common or in conflict with any relevant public authority, including the resolution authority, and the institution or entity referred to in point (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU, including its senior management, controlling shareholders, group entities and significant creditors, as could be the case when the independent valuer is a significant creditor of the institution or entity concerned. Similarly, personal relationships could represent a material interest.

(39) Accordingly, the appointing authority, or such other authority as may be empowered to conduct the task in the Member State concerned, should assess whether any material common or conflicting interests are present. For the purposes of this assessment the independent valuer should notify the appointing authority, or such other authority as may be empowered to conduct this task in the Member State concerned, of any actual or potential interest which the person considers may, in the assessment of that authority, be considered to amount to a material interest and provide any information as may be reasonably requested by the authority to inform this assessment. In the case of legal persons, independence should be assessed by reference to the company or partnership as a whole but taking account of any structural separation and other arrangements that may be put in place to differentiate between those staff members who may be involved in the valuation and other staff members, to address threats such as self-review, self-interest, advocacy, familiarity, trust or intimidation. If the significance of those threats compared to the safeguards applied is such that the person's independence is compromised, the company or partnership should not be the independent valuer.

(40) A statutory auditor who has completed an audit of the institution or entity referred to in point (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU in the year preceding the independent valuer's assessment for eligibility to act as valuer should not be regarded as independent under any circumstances. As regards other audit or valuation services provided to the institution or entity concerned in the years immediately preceding the date on which independence is to be assessed, these should also be assumed to present a material interest in common or in conflict unless it is demonstrated to the satisfaction of the appointing authority, or such other authority as may be empowered to conduct this task in the Member State concerned, that this is not the case having regard to all relevant circumstances, including any structural separation or other arrangements in place.

(41) Following appointment it is essential that the independent valuer maintains policies and procedures in accordance with the applicable codes of ethics and professional standards to identify any actual or potential interest which the valuer considers may amount to a material interest in common or in conflict. The appointing authority, or such other authority as may be identified in the Member State concerned, should be notified immediately of any actual or potential interests identified and should consider whether these amount to a material interest in which case the independent valuer's appointment should be terminated and a new valuer appointed.

(42) Directive 2014/59/EU requires Member States to confer on their resolution authorities a range of powers, including the write-down and conversion powers as defined in point (66) of Article 2(1) of that Directive which can be applied independently of, or in conjunction with, resolution action.

(43) It is important to ensure that the write-down and conversion powers can be applied in relation to all liabilities that are not excluded by Article 44(2) of Directive 2014/59/EU. For liabilities governed by the law of a third country, other than those falling within the list of liabilities to which the exclusion in Article 55(1) of Directive 2014/59/EU applies, a contractual term should be included to support the application of the write-down and conversion powers to such liabilities.

(44) The contractual terms referred to in Article 55(1) of Directive 2014/59/EU should be included in agreements creating a liability to which that Article applies, entered into after the date of application of the provisions adopted to transpose Section 5 of Chapter IV of Title IV of Directive 2014/59/EU.

(45) In particular, the contractual term referred to in Article 55(1) of Directive 2014/59/EU should be included in relevant agreements concerning a liability which, on creation, is not fully secured or is fully secured but the contractual terms governing the liability do not oblige the debtor to maintain collateral that would fully secure the liability on a continuous basis in compliance with regulatory requirements specified in Union law or the equivalent law in third countries.

(46) For relevant agreements entered into before the date of application of the provisions adopted to transpose Section 5 of Chapter IV of Title IV of Directive 2014/59/EU the contractual term should be included where liabilities are created under that agreement after the transposition date.

(47) In addition, for relevant agreements entered into before the date of application of the provisions adopted to transpose Section 5 of Chapter IV of Title IV of Directive 2014/59/EU, material amendments which affect the substantive rights and obligations of a party to the agreement should entail the obligation to insert the contractual term referred to in Article 55(1) of Directive 2014/59/EU. Non-material amendments which do not affect the substantive rights and obligations of a party to a relevant agreement should not be sufficient to trigger the requirement to include the contractual term; in all other cases the contractual term should be introduced.

(48) In order to allow for an appropriate level of convergence whilst ensuring that differences in legal systems or those arising from the nature or form of liability can be taken into account by resolution authorities, institutions and entities referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU it is appropriate to lay down the mandatory contents for the contractual term.

(49) With a view to achieving a uniform approach across the Union ensuring effective coordination among the relevant authorities and to enabling the resolution authority to take adequately informed and swift resolution decisions, this Regulation sets out the procedures and content of the notifications laid down in paragraphs 1, 2 and 3 of Article 81 of Directive 2014/59/EU.

(50) Notifications should be effected by secure electronic communications, reflecting the urgency and importance of the subject matter. To promote coordination between the parties, prior oral communication and subsequent confirmation of receipt are contemplated in the process.

(51) Notifications should provide adequate information to the recipient to promptly perform its tasks, specific content is therefore laid down as regards the notification to be submitted to the competent authority by the management body of an institution or entity referred to in point (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU when it is failing or likely to fail. Similarly, the communication of such notification by the competent authority to the resolution authority should contain that information enabling the latter to fulfil its tasks. Specific content requirements should also be provided with regard to the notification of the assessment that an institution or entity referred to in point (b), (c) or (d) of Article 1(1) is failing or likely to fail, when such assessment is initiated by the competent authority or the resolution authority respectively. In such case, the notification should also specify the relevant conditions set out in points (a) and (b) of Article 32(1) of Directive 2014/59/EU.

(52) With a view to providing a harmonised approach across the Union to adequately inform stakeholders of resolution actions, this Regulation sets out the procedures and the content of the notice summarising the effects of the resolution action, including the decision to suspend or restrict the exercise of certain rights in accordance with Articles 69, 70 and 71 of Directive 2014/59/EU.

(53) This Regulation lays down the content of such notice, having regard to some critical information to be conveyed to retail and non-retail customers and creditors; in respect of the elements that are not specified in this Regulation the notice should be consistent with the broader communication strategy developed as part of the resolution plan and addressed in Chapter II, Sections I and II of this Regulation. It is necessary to adopt regulatory technical standards to set out uniform, detailed rules in respect of the establishment of and procedures to be followed by resolution colleges when performing the functions and tasks set out in Article 88 of Directive 2014/59/EU due to the high impact that group resolution planning and resolution may have in more than one Member States.

(54) While establishing a resolution college, it is necessary to avoid duplication of work already conducted by the consolidating supervisor and the supervisory college. It is also important to ensure that this work will be adjusted to respond to the needs of the functioning of the college. In particular, it is appropriate to ensure that the group-level resolution authority takes into account, updates and adjusts accordingly all relevant work conducted by the consolidating supervisor in the context of the supervisory college, in particular with regard to the identification of relevant group entities and consequently the authorities which should be invited to become members or observes of the college (‘mapping process’).

(55) The reference to other groups or colleges performing the same tasks and functions in accordance with Article 88(6) of Directive 2014/59/EU should be understood as including, but not limited to, crisis management groups established under the common principles and approaches developed by the Financial Stability Board and the G20. It is, therefore, important to provide that group-level resolution authorities, when assessing their obligation to establish a resolution college, also assess whether these other groups or colleges operate in accordance with the provisions of this Regulation.

(56) The involvement of third-country resolution authorities as observers in the resolution college is already foreseen in Article 88(3) of Directive 2014/59/EU. It is therefore necessary to provide for the process of organising their participation in the resolution college and of their involvement in the various college tasks.

(57) To achieve effective resolution planning, there is a need for efficient and timely interaction and cooperation between the resolution college and the banking group, in particular between the group-level resolution authority and the Union parent undertaking. To that end, the group-level resolution authority is expected to inform the Union parent undertaking on the establishment of the resolution college, its composition and on any changes in this composition. Efficient and timely interaction and cooperation between the group-level resolution authority and the Union parent undertaking should not, however, disregard the speed of action required to preserve financial stability or the preparatory or preventive nature and the complex economic assessment required in resolution planning.

(58) The resolution college's written arrangements and procedures should include the necessary organisational provisions to ensure efficient and effective decision-making processes. In particular, the resolution college should recognise the need to establish flexible substructures within the resolution college to carry out college functions and ensure that members are able to contribute in an appropriate manner across each of the college's functions. In particular, where it is deemed appropriate that authorities, other than the college members, participate in the college as observers, it is necessary that the group-level resolution authority ensures that the terms and conditions of the participation are set out in the written arrangements and that they are not more favourable than those set out in this Regulation for the members of the college.

(59) The resolution college's written arrangements and procedures should also include the necessary operational provisions to ensure that the college enables the resolution authorities to both coordinate their input to the supervisory college and to organise the analysis, consideration and evaluation of the input that the resolution authorities receive from the supervisory college. Written arrangements should, therefore, ideally include a process of communication between the supervisory and the resolution college, most importantly between the group-level resolution authority and the consolidating supervisor. Written arrangements should also lay down the processes to be followed within the resolution college for reaching a common understanding, in all cases where coordination is needed in practice but a joint decision is not required in accordance with Directive 2014/59/EU.

(60) The group-level resolution authority should have access to all information necessary for the performance of its tasks and responsibilities and should act as the coordinator for the collection and dissemination of information received from any college member, or from any group entity subject to the confidentiality provisions and provisions covering the exchange of confidential information laid down in Directive 2014/59/EU.

(61) To ensure that operational procedures are effective to address a case of emergency, the group-level resolution authority should undertake tests for the functioning of the resolution college and should, where deemed appropriate, be enabled to involve the Union parent undertaking in the performance of these tests.

(62) Timely and realistic planning for all joint decision processes is essential. Every resolution authority involved in these processes should provide to the group-level resolution authority its contribution in the respective joint decision in a timely and efficient way and in accordance with the relevant joint decision timetables.

(63) It is necessary to ensure that joint decisions are taken swiftly and in a timely manner. This is particularly important for decisions on resolution but is also relevant for resolution planning. At the same time, it should be ensured that all authorities involved in the joint decision-making process are provided with adequate time to express their views. To strike the proper balance between these two objectives, the group-level resolution authority should be empowered to submit its draft proposal to the other authorities involved in the process setting at the same time an adequate time limit after the lapse of which the consent of the non-objecting authorities to that proposal should be assumed. When setting the relevant time limit, the group level resolution authority should take due account of the actual time frame of the decision-making process as set out by provisions of the law or as previously determined by the college itself.

(64) To ensure that an effective process is established, the group-level resolution authority should have the ultimate responsibility for determining the sequencing of the steps to be followed. The steps for reaching any joint decision should be set out, recognising that some of these steps may be performed in parallel and others sequentially.

(65) In accordance with Article 13(3) of Directive 2014/59/EU, group resolution plans should be reviewed and updated at least annually. There is however a need to ensure that group resolution plans are also reviewed and updated on an ad hoc basis, if such a need arises either due to information received by the supervisory college or on the resolution college's own initiative.

(66) To enhance transparency of the functioning of the resolution colleges, uniform conditions of communication of the joint decisions to the Union parent undertaking and to the other entities of the relevant group should be clearly set out in this Regulation. For reasons of ensuring comparability of processes and outcomes, thus achieving convergence, it is necessary to clearly set out uniform rules on the process and documentation required for the joint decision-making within the resolution colleges.

(67) Coordination of individual decisions made by the group-level resolution authority and the resolution authorities of subsidiaries in the absence of a joint decision should also be ensured in order for the resolution college to be able to perform its role as provided for in Article 88(1) of Directive 2014/59/EU. Thus, it is necessary to set out the process of the functioning of the college as a framework for the group-level resolution authority and the other authorities to strive for efficient and workable group resolution planning even in the absence of joint decisions.

(68) In identifying whether there is a need for a group resolution scheme, the relevant resolution authorities participating in the resolution college should consider, in line with Articles 91 and 92 of Directive 2014/59/EU, whether there is a group dimension to the resolution at hand. For that purpose the group-level resolution authority should endeavour to identify all entities of the group which are or could be impacted in case that an entity of the group or the Union parent undertaking meets the conditions under Article 32 or 33 of Directive 2014/59/EU.

(69) In order to ensure optimal conditions for a resolution, there is a need to work efficiently and effectively within a short time frame. Therefore,, it is important to provide that the resolution college, when considering the need for a group resolution scheme, should also consider the need to mutualise national financial arrangements. In particular, with regard to financing plans and the application of Directive 2014/59/EU, the resolution college should take into account whether mutualisation of national financial arrangements is necessary. In the absence of mutualisation, the content and process of the financing plan should be adjusted accordingly. To further ensure efficiency, the group-level resolution authority should be allowed to substitute its final positive assessment on the need for a group resolution scheme with its proposal on that scheme.

(70) The group resolution scheme should, to the extent possible and appropriate, take into account and follow the group resolution plan unless resolution authorities assess, taking into account the circumstances of the case, that the resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plan.

(71) There is a need for all those impacted by the resolution of an institution to have a complete understanding of the views and actions of a resolution authority which disagrees with the joint decision on the group resolution scheme for coordination purposes. Therefore any disagreeing authority should provide clear reasoning to the group-level resolution authority for their disagreement.

(72) This Regulation is based on the draft regulatory technical standards submitted by the European Banking Authority (EBA) to the Commission.

(73) For the purposes of the regulatory technical standards on the content of resolution plans 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, and for the regulatory technical standards relating to the criteria to be examined for the assessment of the resolvability of institutions or groups, provided for, respectively in Article 15(4) and Article 16(2) of the Directive 2014/59/EU, the EBA has consulted the European Systemic Risk Board.

(74) The EBA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits, and requested the opinion of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010,

HAS ADOPTED THIS REGULATION:

CHAPTER I

COMMON PROVISIONS AND RECOVERY PLANS

SECTION I

Common provisions

Article 1

Subject matter

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.

Article 2

Definitions

For the purposes of this Regulation, the following definitions apply:

(1) ‘individual recovery plan’ means any of the following: (a) 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; (b) 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 (4);

(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

Article 3

Information to be included in a recovery plan

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.

Article 4

Summary of the key elements of the recovery plan

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.

Article 5

Governance

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: (a) the role and function of persons responsible for preparing, implementing and updating each section of the plan; (b) 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; (c) a description of how the plan is integrated in the corporate governance of the institution or group and in the overall risk management framework; (d) 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: (a) a statement whether the recovery plan has been reviewed by an internal audit function, external auditor or risk committee; (b) 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: (a) 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: (i) 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; (ii) the procedures that need to be followed; (iii) 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; (b) 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.

Article 6

Strategic analysis

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.

Article 7

The description of entities covered by the recovery plan

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: (i) a description of their overall global business and risk strategy; (ii) 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; (iii) their core business lines and critical functions; (iv) 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: (i) 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; (ii) 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; (iii) 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; (iv) 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: (i) significant exposures and liabilities to main counterparties; (ii) significant financial products and services which are provided by the entity or entities covered by the recovery plan to other financial market participants; (iii) 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.

Article 8

Recovery options

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.

Article 9

Actions, arrangements and measures under recovery options

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.

Article 10

Impact assessment

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.

Article 11

Feasibility assessment

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.

Article 12

Continuity of operations

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.

Article 13

Cross references

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.

Article 14

Communication and disclosure plan

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.

Article 15

Preparatory measures

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

Article 16

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

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

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

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

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

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.

CHAPTER II

RESOLUTION PLANS

SECTION I

Content of resolution plans

Article 22

Categories of information to be included in resolution plans

A resolution plan shall contain at least the elements laid down in points (1) to (8) of this Article, including all information required under Articles 10 and 12 of Directive 2014/59/EU and any additional information necessary to enable the delivery of the resolution strategy:

(1) a summary of the plan, including a description of the institution or group and a summary of items referred to in points (2) to (8);

(2) a description of the resolution strategy considered in the plan, including: (a) identification of the different resolution actions foreseen under the plan; (b) identification of the legal entity or entities to which resolution actions would be applied; (c) identification of any critical functions or core business lines which will be maintained and any which are expected to be separated from other functions; (d) an estimation of the time frame for executing each material aspect of the plan, as required pursuant to point (d) of Article 10(7) of Directive 2014/59/EU; (e) a detailed description of any variants of the preferred resolution strategy considered to address circumstances in which the preferred strategy cannot be implemented; (f) a description of the decision-making process for implementing the resolution strategy, including the time frame required for decisions; (g) for group resolution plans, arrangements for cooperation and coordination between resolution and other relevant authorities of Member States in which group entities are located or have significant branches and relevant authorities of third countries in which group entities are located, in lines with the written arrangements and procedure as set out in Chapter VI, Section I;

(3) a description of the information, and the arrangements for the provision of this information, necessary in order to effectively implement the resolution strategy, including at least: (a) a description of the information, and processes for ensuring availability in an appropriate timescale of that information required for the purposes of valuation, in particular pursuant to Articles 36 and 49 of Directive 2014/59/EU, and market ability, in particular pursuant to the marketing requirements for the sale of business and bridge bank tools; (b) a mapping of critical functions and core business lines to legal entities which identifies in particular the critical functions and core business lines carried out by entities subject to resolution actions and the critical functions or core business lines spread across legal entities which would be separated by implementation of the resolution strategy; (c) a description of the arrangements for the sharing of information between resolution authorities and other relevant authorities, including where relevant authorities in other Member States or in third countries, in accordance with Article 90 of Directive 2014/59/EU; (d) a detailed description of arrangements for ensuring that information pursuant to Article 11 of Directive 2014/59/EU is up to date and available to resolution authorities when required;

(4) a description of arrangements to ensure operational continuity of access to critical functions during resolution, including at least the description of: (a) critical shared systems and operations which need to be continued to maintain continuity of critical functions and arrangements for ensuring the contractual and operational robustness of their provision in resolution; (b) internal and external interdependencies which are critical to the maintenance of operational continuity; (c) arrangements for ensuring any access to payment systems or other financial infrastructures necessary to maintain critical functions, including an assessment of the portability of client positions;

(5) a description of the financing requirements and financing sources necessary for the implementation of the resolution strategy foreseen in the plan, including at least: (a) the description of financing, funding and liquidity requirements implied by the resolution strategy; (b) the description of potential sources of resolution funding, including the terms of financing, preconditions for their use, the timing of their availability, the entities to which they may provide financing, and any collateral requirements; (c) where relevant, a description and analysis of how and when an institution or group may apply, in the conditions addressed by the resolution plan, for the use of central bank facilities (other than emergency liquidity assistance or other assistance on non-standard terms) in resolution, including identification of available collateral; (d) for groups, the description of any principles agreed for sharing responsibility for financing between sources of funding in different jurisdictions, including between sources of funding in different Member States pursuant to point (f) of Article 12(3) of Directive 2014/59/EU;

(6) plans for communication with critical stakeholder groups, including at least: (a) the management, owners, and staff of the institution or group including procedures for consultation with staff and, where applicable, dialogue with social partners in the resolution process, and an assessment of the impact of the plan on employees; (b) customers, media and the general public; (c) depositors, shareholders, bondholders, counterparties, financial market infrastructures, and other affected market participants; (d) any administrative or judicial bodies from whom approval or authorisation critical to implementing the resolution strategy is required; (e) any advisors required to implement the resolution strategy;

(7) the conclusions of the assessment of resolvability, including at least: (a) whether or not the institution or group is currently resolvable; (b) a summary of the conclusions of the liquidation assessment required in point (a) of Article 23(1); (c) a detailed description of any impediments to resolvability identified, and of any measures proposed by the institution or group or required by the resolution authority to address or remove those impediments; (d) a quantified assessment of any change to minimum requirements for eligible liabilities, or the appropriate location of eligible liabilities, that is required to remove or address impediments to resolvability, taking into account the criteria specified in Article 45(6) of Directive 2014/59/EU and further specified in the delegated acts adopted pursuant to Article 45(2) of Directive 2014/59/EU;

(8) any opinion expressed by the institution or group in relation to the resolution plan.

SECTION II

Assessment of resolvability

Article 23

Stages of assessment

1. Resolution authorities shall assess resolvability based on the following consecutive stages:

(a) assessment of the feasibility and credibility of the liquidation of the institution or group under normal insolvency proceedings in accordance with Article 24;

(b) selection of a preferred resolution strategy for assessment in accordance with Article 25;

(c) assessment of the feasibility of the selected resolution strategy in accordance with Articles 26 to 31;

(d) assessment of the credibility of the selected resolution strategy in accordance with Article 32.

2. Where the resolution authority considers that it is clear that institutions or groups pose similar risks to the financial system or that the circumstances in which their liquidation is unlikely to be feasible are similar, that resolution authority may conduct the assessment of the feasibility and credibility of the liquidation of those institutions or groups in a similar or identical manner.

The types of institutions referred to in the first subparagraph may in particular be determined in accordance with the criteria referred to in Article 98(1)(j) of Directive 2013/36/EU.

3. Where a resolution authority concludes that it may not be feasible or credible to wind up the institution or group entities under normal insolvency proceedings, or that resolution action may otherwise be necessary in the public interest because winding up under normal insolvency proceedings would not meet the resolution objectives to the same extent, it shall identify a preferred resolution strategy which is appropriate for the institution or group on the basis of information provided by the institution or group pursuant to Article 11 of Directive 2014/59/EU and the criteria set out in this Regulation. To the extent necessary, it shall also identify variant strategies to address circumstances in which the strategy would not be feasible or credible.

4. The assessments of the feasibility and credibility of the preferred resolution strategy shall include assessment of any variant strategies proposed as part of that strategy.

5. Resolution authorities shall request from the institution or group in accordance with Article 11 of Directive 2014/59/EU such additional information as is necessary to carry out the assessments of the preferred and variant strategies.

6. Where appropriate, a resolution authority shall revise the preferred resolution strategy or consider alternative strategies on the basis of a completed assessment of feasibility and of the credibility of a preferred resolution strategy referred to in paragraph 4.

7. Where a resolution authority revises the preferred resolution strategy it shall assess the feasibility and the credibility of that revised preferred resolution strategy in accordance with Articles 26 and 27 respectively.

Article 24

Feasibility and credibility of liquidation under normal insolvency proceedings

1. Resolution authorities shall assess the feasibility and credibility of liquidation of the institution or group under normal insolvency proceedings, as well as the impact that liquidation would have in the reliance on extraordinary public financial support as compared to resolution.

2. When assessing the credibility of liquidation, resolution authorities shall consider the likely impact of the liquidation of the institution or group on the financial systems of any Member State or of the Union to ensure the continuity of access to critical functions carried out by the institution or group and achieving the resolution objectives of Article 31 of Directive 2014/59/EU. For this purpose, resolution authorities shall take into account the functions performed by the institution or group and assess whether liquidation would be likely to have a material adverse impact on any of the following:

(a) financial market functioning and market confidence;

(b) financial market infrastructures, in particular: (i) whether the sudden cessation of activities would constrain the normal functioning of financial market infrastructures in a manner which negatively impacts the financial system as a whole; (ii) whether and to what extent financial market infrastructures could serve as contagion channels in the liquidation process;

(c) other financial institutions, in particular: (i) whether liquidation would raise the funding costs of or reduce the availability of funding to other financial institutions in a manner which presents a risk to financial stability; (ii) the risk of direct and indirect contagion and macroeconomic feedback effects;

(d) the real economy and in particular the availability of critical financial services.

3. If the resolution authority concludes that liquidation is credible, it shall assess the feasibility of liquidation.

4. For this purpose resolution authorities shall consider whether the institution's or group's systems are able to provide the information required by the relevant deposit guarantee schemes for the purposes of providing payment to covered deposits in the amounts and time frames specified in Directive 2014/49/EU of the European Parliament and of the Council (5), or where relevant in accordance with equivalent third country deposit guarantee schemes, including on covered deposit balances.

Resolution authorities shall also assess whether the institution or the group has the capability required to support the deposit guarantee schemes' operations, in particular by distinguishing between covered and non-covered balances on deposit accounts.

Article 25

Identification of a resolution strategy

1. Resolution authorities shall assess whether a candidate resolution strategy is appropriate to achieve the resolution objectives given the structure and business model of the institution or group, and the resolution regimes applicable to legal entities in a group. A resolution action may be taken in the public interest if it is necessary for the achievement of and is proportionate to one or more of the resolution objectives and winding up of the institution under normal insolvency proceedings would not meet those resolution objectives to the same extent.

2. In particular for groups, resolution authorities shall assess whether it would be more appropriate to apply a single point of entry or a multiple point of entry strategy.

3. For these purposes resolution authorities shall consider at least the following matters:

(a) what resolution tools would be used under the preferred resolution strategy and whether those resolution tools are available for legal entities to which the resolution strategy proposes to apply them;

(b) the amount of qualifying eligible liabilities under the proposed resolution strategy, the risk of not contributing to loss absorption or recapitalisation, and the legal entities issuing those qualifying eligible liabilities, taking into account that: (i) single point of entry is more likely to be appropriate if sufficient externally issued eligible liabilities, or liabilities expected to contribute to loss absorption and recapitalisation under the proposed resolution strategy are issued by the top parent or group holding company; (ii) multiple point of entry is more likely to be appropriate if the group's eligible liabilities or liabilities expected to contribute to loss absorption and recapitalisation under the proposed resolution strategy are issued by more than one entity or regional or functional subgroup in the group which would be resolved;

(c) the contractual or other arrangements in place for losses to be transferred between legal entities in a group;

(d) the operational structure and business model of the institution or group, and in particular whether it is highly integrated or has a decentralised structure with a high degree of separation between different parts of the institution or group, taking into account that: (i) single point of entry is more likely to be appropriate if a group operates in a highly integrated manner, including by having centralised liquidity management, risk management, treasury functions, or IT and other critical shared services; (ii) multiple point of entry is more likely to be appropriate if a group's operations are divided into two or more clearly identifiable subgroups, each of which is financially, legally or operationally independent from other parts of the group, and any critical operational dependencies on other parts of the group are based on robust arrangements that ensure their continued operation in the event of resolution;

(e) the enforceability of resolution tools which would be applied, in particular in third countries;

(f) whether the resolution strategy requires supporting action by other authorities, in particular in third countries, or requires such authorities to refrain from independent resolution actions; and whether any such actions are feasible and credible for those authorities.

4. Resolution authorities shall assess whether variants of the resolution strategy are necessary to address scenarios or circumstances where the resolution strategy cannot be feasibly and credibly implemented.

5. Resolution authorities shall consider the extent to which any variant strategy is likely to achieve the resolution objectives and in particular ensure the continuity of critical functions.

Measures to remove impediments to variants of the resolution strategy shall only be implemented if they do not impair the feasible and credible implementation of the preferred resolution strategy.

Article 26

Assessment of feasibility of a resolution strategy

1. Resolution authorities shall assess whether it is feasible to apply the selected resolution strategy effectively in an appropriate time frame and shall identify potential impediments to the implementation of the selected resolution strategy.

2. Resolution authorities shall consider impediments to the short-term stabilisation of the institution or group. Resolution authorities shall also consider any foreseeable impediments to a business reorganisation which is required pursuant to Article 52 of Directive 2014/59/EU or otherwise likely to be required if the resolution strategy envisages all or part of the institution or group being restored to long-term viability.

3. Impediments shall be classified in at least the following categories:

(a) structure and operations;

(b) financial resources;

(c) information;

(d) cross-border issues;

(e) legal issues.

Article 27

Assessment of feasibility: structure and operations

Resolution authorities shall consider at least the following issues in assessing whether there are potential impediments to resolution related to the structure and operations of the institution or group:

(1) matters addressed in points 1 to 7, 16, 18 and 19 of Section C of the Annex to Directive 2014/59/EU;

(2) dependencies of material entities and core business lines on infrastructure, information technology, treasury or finance functions, employees or other critical shared services;

(3) whether governance, control, and risk management arrangements are consistent with any planned changes to the structure of the institution or group;

(4) whether the legal and franchise structure of the institution or group is consistent with any planned changes to the business structure of the institution or group;

(5) whether appropriate resolution tools are available with respect to each legal entity as required to deliver the resolution strategy.

Article 28

Assessment of feasibility: financial resources

Resolution authorities shall consider at least the following issues in assessing whether there are potential impediments to resolution related to financial resources:

(1) matters addressed in points 13, 14, 15 and 17 of Section C of the Annex to Directive 2014/59/EU;

(2) the need to identify and quantify the amount of any liabilities which are likely under the preferred resolution strategy not to contributing to loss absorption or recapitalisation, considering at a minimum the following factors: (i) maturity; (ii) subordination ranking; (iii) the types of holders of the instrument, or the instrument's transferability; (iv) legal impediments to loss absorbency such as lack of recognition of resolution tools under foreign law or existence of set-off rights; (v) other factors creating risk that the liabilities would be exempted from absorbing losses in resolution; (vi) the amount and issuing legal entities of qualifying eligible liabilities or other liabilities which would absorb losses;

(3) the size of funding needs in the run-up to and during resolution, the availability of sources of funding, and impediments to the transfer of funds as required within the institution or group;

(4) whether appropriate arrangements are specified for losses to be transferred to legal entities to which resolution tools would be applied from other group companies, including where relevant an assessment of the amount and loss-absorbency of intragroup funding.

Article 29

Assessment of feasibility: information

Resolution authorities shall consider at least the following issues in assessing whether there are potential impediments to resolution related to information:

(1) matters addressed in points 8 to 12 of Section C of the Annex to Directive 2014/59/EU;

(2) the capability of the institution or group to provide information on the amount, and location within the group, of assets which would be expected to qualify as collateral for central bank facilities;

(3) the capability of the institution or group to provide information to carry out a valuation to determine the amount of write-down or recapitalisation required.

Article 30

Assessment of feasibility: cross-border issues

Resolution authorities shall consider at least the following issues in assessing whether there are potential impediments to resolution related to cross-border issues:

(1) matters addressed in point 20 of Section C of the Annex to Directive 2014/59/EU;

(2) existence of adequate processes for coordination and communication and assurances on actions to be taken between home and host authorities, including in third countries, to enable delivery of the resolution strategy;

(3) whether law in relevant home and host jurisdictions overrides contractual termination rights in financial contracts that are triggered solely by the failure and resolution of an affiliated company.

Article 31

Assessment of feasibility: other potential impediments

The following legal issues shall be considered in assessing potential impediments to resolution:

(1) whether requirements for regulatory approvals or authorisations necessary to deliver the resolution strategy can be met in a timely manner;

(2) whether significant contractual documentation permits termination of contracts on entry into resolution;

(3) whether contractual obligations which cannot be disapplied by the resolution authority prohibit any transfer of assets and/or liabili