Circular Letter No. CC/2023/00000043 on EBA Recovery Plans

Circular Letter No. CC/2023/00000043
Sent to:
Credit Institutions.
Mod. 40000375/T – 01/14
Subject: Adoption of EBA Guidelines/Recommendations on Recovery Plans

On July 18, 2014, the European Banking Authority (EBA) published the “Guidelines on the range of scenarios to be used in recovery plans” (EBA/GL/06/2014)1, which apply from January 1, 2015. These Guidelines specify the various scenarios of severe financial and macroeconomic difficulties that must be used for the purposes of Article 5(6) and Article 7(6) of the BRRD2. The preparation of the various scenarios aims to define a set of hypothetical but plausible events to test the effectiveness of recovery options and the adequacy of the indicators included in the recovery plan.

On November 1, 2017, the EBA published the “Recommendation on the coverage of entities in a group recovery plan” (EBA/REC/2017/02)3, which applies from January 1, 2018. This Recommendation describes the coverage of branches and sub-subsidiaries (entities or group of entities) in the group recovery plan, prepared and submitted in accordance with Articles 5 to 9 of the BRRD4, with Articles 3 to 21 of Commission Delegated Regulation (EU) 2016/1075 of March 23, 2016, and with the EBA Guidelines on recovery plan indicators and on the range of scenarios to be used in recovery plans.

On November 9, 2021, the EBA published the “Guidelines on recovery plan indicators” (EBA/GL/2021/11)5, which apply from February 14, 2022 and repealed the “Guidelines on the minimum list of qualitative and quantitative indicators of the recovery plan” (EBA/GL/2015/02) of May 6, 2015. These Guidelines specify the minimum list of quantitative and qualitative indicators of the recovery plan, the mechanisms for the periodic verification of these indicators, the time from which the measures referred to in the recovery plans may be activated, the measures to be taken regarding these indicators, and the conditions necessary for the application of Article 9(1) of the BRRD6, with regard to these indicators.

1 https://www.eba.europa.eu/regulation-and-policy/recovery-and-resolution/guidelines-on-the-range-of-scenarios-to-be-used-in-recovery-plans 2 Directive 2014/59/EU of the European Parliament and of the Council of May 15, 2014. The BRRD requirements referred to were integrated into the national legal order through Article 116-G(4) and Article 116-M(4), both of the General Regime of Credit Institutions and Financial Companies (RGICSF), approved by Decree-Law No. 298/92 of December 31.
3 https://www.eba.europa.eu/regulation-and-policy/recovery-and-resolution/recommendations-on-the-coverage-of-entities-in-a-group-recovery-plan 4 The BRRD requirements referred to were integrated into the national legal order through Articles 116-G to 116-O of the RGICSF.
5 https://www.eba.europa.eu/regulation-and-policy/recovery-and-resolution/guidelines-on-recovery-plans-indicators 6 The BRRD requirements referred to were integrated into the national legal order in Article 116-G(6) and Article 116-H(1)(t), both of the RGICSF.

Mod. 40000375/T – 01/14
On July 19, 2023, the EBA published the “Guidelines on overall recovery capacity in recovery planning” (EBA/GL/2023/06)7, which will apply from January 11, 2024. These Guidelines specify how institutions must include in individual and group recovery plans a summary of their overall recovery capacity, in accordance with Articles 5 and 7 and point 1 of Section A of the Annex to the BRRD8, and with Section II of Chapter 1 of Commission Delegated Regulation (EU) 2016/1075 of March 23, 2016, and how competent authorities must assess the overall recovery capacity of institutions in the context of the assessment of individual and group recovery plans, in accordance with Articles 6 and 8 of the BRRD8 and with Section III of Chapter 1 of Delegated Regulation (EU) 2016/1075.

In this context, the Bank of Portugal highlights the importance of credit institutions following the provisions of the aforementioned Guidelines and Recommendation, in order to ensure adequate compliance with current legislation and regulation. It is further informed that the Bank of Portugal has communicated to the EBA its intention to comply with these Guidelines/Recommendation, so that the practices defined therein are taken into account in the exercise of supervisory activities, being, in particular, taken into account in the interpretation of the legal and regulatory provisions applicable to institutions, for the purposes of verifying compliance therewith.

7 https://www.eba.europa.eu/regulation-and-policy/recovery-and-resolution/guidelines-overall-recovery-capacity-recovery-planning 8 The BRRD requirements referred to were integrated into the national legal order in Articles 116-G to 116-O of the RGICSF.