Recovery Plan overview

“The recovery plan is a firm’s complete menu of options addressing a range of severe financial stresses caused by idiosyncratic problems, market-wide stress or both. The PRA expects the recovery plan to include all credible options for addressing both liquidity and capital difficulties” [PRA’s Supervisory Statement SS18/13 - Recovery Planning]

Banks should maintain recovery plans, outlining credible recovery actions that can be implemented in a severe stress scenario, which will enable the bank to restore its business to a stable and sustainable condition.

The Recovery Plan builds on the bank’s risk management framework and stress tests conducted for the Internal Capital Adequacy Assessment Process (“ICAAP”) and Internal Liquidity Adequacy Assessment Process (“ILAAP”) exercises. The bank formally articulates recovery triggers and recovery options rather than just relying on modelled buffer requirements to manage stress scenarios. Depending on the severity of the risk and conditions arising, it could be necessary for the bank to be downsized or recapitalised by its shareholders.

This Recovery Plan should document the bank’s approach to severe stress scenarios setting out:

1.       The Early Warning Indicator (“EWI”) framework - setting out the banks limits, early warning indicators, risk appetite, risk capacity and triggers

2.       The recovery options available to the bank considering, for each, key aspects of their implementation (including the practicalities, impediments and time frames) together with conclusions about the resulting beneficial outcomes, notably on capital and liquidity. The document also outline recovery options which were viewed as not viable

3.       The potential scenarios that could invoke the recovery plan, considered under idiosyncratic stresses, market-wide stresses and combined stresses

4. The recovery options that can be used as part of the management actions to restore the bank’s business to a stable and sustainable condition