These guidelines aim to establish a common framework to improve the resolvability of financial institutions and resolution authorities. They introduce a self-assessment by resolution entities and require authorities to develop a multi-annual testing program to assess resolvability capabilities. A master playbook is also proposed for the most complex institutions to ensure a coherent approach to resolution planning.
This document is a final report published in June 2023 by the European Banking Authority (EBA). It is an amended guide to the EBA/GL/2022/01 guidelines on improving the resolvability of financial institutions and resolution authorities, in accordance with Articles 15 and 16 of Directive 2014/59/EU (BRRD). The scope covers resolvability testing of banking institutions and resolution groups within the European Union, focusing on so-called complex institutions (G-SIIs, Top Tier) and non-resolution entities within groups. The application period begins on January 1, 2024, with deadlines for submission of first self-assessment reports by December 31, 2024, multi-annual testing programmes by December 31, 2025, and master playbooks for complex institutions by the same date. The document comprises 39 pages.
The document addresses the introduction of a new section on resolvability testing in the existing EBA guidelines, to strengthen the preparedness of financial institutions for resolution in case of failure. This topic is crucial to ensure financial stability and avoid costs for taxpayers by guaranteeing that banks have the operational capabilities necessary to execute their resolution strategy. The main findings are that, since the 2015 BRRD Directive, resolution authorities have progressed in planning, but resolvability testing practices remain heterogeneous and insufficiently harmonized within the EU. The conclusions are that to improve this situation, it is necessary to: (i) introduce a formalized self-assessment by institutions, focused on the minimum capabilities defined in the EBA guidelines on resolvability and transferability; (ii) require resolution authorities to develop a three-year multi-annual testing programme, adapted to the risk profile and maturity of institutions; (iii) establish a master playbook for complex institutions, coordinating the various plans and processes related to resolution. Recommendations include submitting the first self-assessment reports by the end of 2024, communicating testing programmes by the end of 2025, and producing master playbooks for large institutions by the same deadline. These measures aim to formalize and harmonize practices, strengthen cooperation between authorities and institutions, and ensure better operational preparedness for resolution (pp. 3-4).
The document responds to the need to improve the operational preparedness of financial institutions for resolution, in accordance with Articles 15 and 16 of Directive 2014/59/EU and Delegated Regulation (EU) 2016/1075. Since the adoption of the BRRD, resolution authorities have established resolution strategies and plans, but concrete implementation through testing remains uneven and non-harmonized in the EU. The objective is to specify the steps and tools that authorities and institutions must use to ensure that the latter can effectively support the execution of their resolution strategy. The document aims to formalize the self-assessment of resolvability capabilities by institutions, require a multi-annual testing programme by authorities, and introduce a master playbook for complex institutions to ensure consistency of operational capabilities. The scope covers resolution groups and individual entities, including non-resolution subsidiaries exceeding certain thresholds of own funds and eligible liabilities. Institutions in liquidation are excluded unless otherwise decided by authorities. The document takes into account feedback from public consultations and aims for a proportionate application according to the size and complexity of institutions (pp. 5-11).
- Self-assessment report: Institutions must, at least every two years, submit a formalized self-assessment report describing their understanding of the resolution strategy, their compliance with the minimum capabilities defined in the EBA guidelines on resolvability and transferability, identified gaps, their integration into business-as-usual (BAU) activities, and links with recovery planning. This report must also include internal or external assurance work (audit, consultants, dry runs) and any additional topics requested by the authority. The first report is expected by December 31, 2024. This self-assessment aims to strengthen institutions' involvement and clarity on their role in resolution (pp. 16-18).
- Multi-annual testing programme: Resolution authorities must develop a testing programme covering a three-year period (including two indicative years), based on institutions' self-assessments and incorporating the capabilities listed in the EBA guidelines. This programme must be updated annually and communicated to institutions no later than with the resolution plan summary. Tests may include various methods, from self-certification to on-site inspections, chosen according to a risk-based approach considering the SREP profile, capability maturity, and quality of internal assurance work. Coordination between national and cross-border authorities is required, notably through resolution colleges. The first programme must be communicated before the end of 2025 (pp. 18-20).
- Master playbook: Intended for complex institutions (G-SIIs, Top Tier, and others identified as systemic), this document must orchestrate and coordinate the various sub-playbooks (bail-in, transfer, operational continuity, communication, financing, etc.) to ensure coherence and effectiveness in executing the resolution strategy. It must define senior management roles and responsibilities, key decisions, plan activation triggers, information flows, and the timeline of actions from pre-resolution phase to post-resolution restructuring. The master playbook must be updated annually or after any significant change, with notification to authorities. The first is expected by the end of 2025. It must not be a mere compilation but a comprehensive operational guide (pp. 19-21).
- Scope and coordination: The guidelines apply mainly at the resolution group level, but also to non-resolution subsidiaries exceeding certain thresholds of own funds and eligible liabilities, to ensure their preparedness to support the group’s resolution strategy. Self-assessments and testing programmes must be coordinated between national and cross-border resolution authorities, with sharing of results in resolution colleges (pp. 8-10).
- Proportionality: Institutions in liquidation are excluded unless otherwise decided. Obligations are adapted according to size, complexity, and risk profile, with flexible choice of testing methods by authorities. The master playbook is reserved for the most complex institutions. This approach aims to limit unnecessary burdens while ensuring adequate preparedness (pp. 9-10).
- Testing methods: Annexes detail a non-exhaustive list of methods ranging from self-certification, self-assessment, demonstrations, practical exercises (fire drills, dry runs, desktop exercises), internal and external audits, deep dives to on-site inspections. This diversity allows adapting tests to specific needs and risks (pp. 22-23).
- Public consultation and feedback: The document incorporates feedback from the public consultation and the Banking Stakeholder Group, notably on the need for transparency of authorities, coordination between supervisory and resolution authorities, clarity of responsibilities between recovery and resolution phases, frequency of reports, and document structure. These elements led to adjustments to strengthen clarity and coordination (pp. 25-38).
- Findings: Resolution authorities have progressed in resolution planning since 2015, but resolvability testing remains heterogeneous and poorly harmonized in the EU. Institutions must comply with the EBA guidelines on resolvability and transferability by January 2024. Self-assessment, multi-annual testing programme, and master playbook are now formal requirements.
- Assumptions: Improving resolvability requires increased involvement of institutions through self-assessment and tests coordinated by authorities. Proportionality and flexibility of testing methods will allow adapting requirements to institution profiles.
- Interpretations: The master playbook is a key tool for complex institutions, aiming to ensure coherence and coordination of resolution plans. Self-assessment structures dialogue between authorities and institutions, fostering better understanding and preparedness.
- Uncertainties: Effective implementation will depend on the quality of self-assessments, coordination between national and cross-border authorities, and institutions’ capacity to integrate these requirements into their processes. Precise impacts on costs and operational burden vary by institution.
These results highlight the need for a harmonized and structured framework to guarantee effective resolvability of financial institutions in Europe (pp. 3-11, 25-38).
The EBA concludes that the formal introduction of self-assessment, the multi-annual testing programme, and the master playbook is essential to strengthen the resolvability of financial institutions in the EU. These tools should enable better involvement of institutions, more effective supervision by authorities, and increased coordination within groups and between national and cross-border authorities. Key recommendations are:
- Institutions must submit their first self-assessment report no later than December 31, 2024.
- Authorities must communicate their first multi-annual testing programme before December 31, 2025.
- Complex institutions must produce their first master playbook by the same deadline.
- Authorities must adopt a proportionate and risk-based approach for selecting testing methods.
- Coordination between resolution and supervisory authorities is encouraged to avoid redundancies.
- Dialogue between authorities and institutions must be strengthened, notably to clarify resolution strategy, responsibilities, and deadlines.
These measures aim to ensure that institutions continuously have the capabilities necessary to effectively execute their resolution strategy, thereby contributing to financial stability and taxpayer protection (pp. 3-4, 25-38).
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