This handbook provides best practices and high-quality methodologies for simulation exercises aimed at resolution authorities, enhancing the preparedness and operational efficiency of resolution processes. It outlines the various phases of a simulation exercise, from initiation to delivery, including planning and preparation. The document also identifies six main types of simulation exercises relevant for…
This document is a report entitled “Handbook on simulation exercises for resolution authorities,” published in July 2025 by the European Banking Authority (EBA). It is a 56-page guide (only the first 37 pages are provided) intended for resolution authorities (RAs) in the context of managing banking crises in Europe. The scope covers simulation exercises (Simulation Exercises, SimEx) related to the resolution of financial institutions in accordance with the European regulatory framework, notably Directive 2014/59/EU (BRRD) and Regulation 1093/2010. The guide aims to harmonize practices, methodologies and processes to improve the operational preparedness of resolution authorities in managing bank failures.
- Subject: This handbook provides high-quality best practices, methodologies and processes to organize and conduct simulation exercises (SimEx) by resolution authorities to improve their operational preparedness and effectiveness in managing banking crises (p. 4).
- Importance: SimEx are essential tools to test, train and create systems related to resolution, allowing authorities to practice decision-making and coordination in controlled environments mimicking real scenarios (p. 4, 8).
- Main findings:
- The handbook establishes a common taxonomy distinguishing tests, simulations and dry runs, with six main types of SimEx: brainstorming, desktop exercise, walkthrough, fire drill, decision-making exercise and operational simulation, as well as the notion of end-to-end simulation combining several types (p. 4, 8-13).
- The initiation phase defines the trigger, concept statement, scope, objectives and results in a simulation charter (SimEx Charter) guiding preparation (p. 14-18).
- The preparation phase includes detailed planning: identification of participants (players, observers, design and control teams), scenario design, definition of rules of the game, resources and budget, as well as participant training and onboarding (p. 18-38).
- The delivery phase is led by the control team which manages progression, delivers injects (information elements to advance or challenge the simulation) and simulates absent stakeholders (p. 39-40).
- The final phase collects feedback from participants and observers, then produces a closure report with lessons learned and recommendations, including an action plan (p. 41-45).
- Conclusions: The handbook provides a structured and harmonized framework for conducting SimEx, promoting convergence of practices among European authorities and facilitating cross-border exercises.
- Recommendations: Authorities should adapt best practices to their context, start with simple SimEx before increasing complexity, ensure clarity of scope and rules, involve relevant stakeholders, and use the provided annexes (charter templates, inject examples, feedback questionnaires, etc.) to optimize exercise organization and follow-up.
- Legal context: The EBA is mandated by Regulation (EU) No 1093/2010 and Directive 2014/59/EU (BRRD) to develop a European resolution handbook, aiming to promote convergence of practices and quality of methodologies in bank resolution (p. 6).
- Issue: Resolution authorities must be prepared to effectively manage complex bank failures, requiring practical and coordinated exercises to test their plans, procedures and decision-making capabilities.
- Objectives: Provide a conceptual framework and best practices to organize and conduct simulation exercises (SimEx) by resolution authorities, improve quality, consistency and interoperability of exercises, notably in a cross-border context (p. 7).
- Scope: The handbook targets European resolution authorities, covers simulations they organize themselves, and addresses different types of exercises relevant to the BRRD framework. It is not legally binding but provides guidance for best practices (p. 6-7).
- Limitations: The document presents a limited number of examples and does not cover all possible situations. It recommends adapting practices according to the size, complexity and specific objectives of each exercise (p. 7, 11).
Typology of simulation exercises:
- Brainstorm: free exercise encouraging creativity to develop or initiate a system, with little preparation, useful as a starting point (p. 9-10).
- Desktop exercise: discussion-based exercise relying on existing plans/procedures, without actual implementation, to identify inconsistencies or gaps, and train participants (p. 10).
- Walkthrough: more advanced exercise, with step-by-step simulated implementation of a process, allowing identification of practical issues and team training (p. 10-11).
- Fire drill / drill: targeted and short exercise to test specific skills or steps, often repeated, also used to verify response times (p. 11-12).
- Decision-making exercise (DME): structured exercise to train decision-making, involving information evaluation, option selection, useful to train decision-makers and test quality of decision procedures (p. 12).
- Operational simulation exercise (OSE): realistic exercise focused on operational application of plans or tools, without decision-making, to test effectiveness and practical training (p. 12-13).
- End-to-end simulation (E2E): comprehensive exercise covering full crisis management, involving multiple authorities and processes, combining several exercise types, the most realistic and complex (p. 13).
Phases of a simulation exercise:
- Initiation: triggering the SimEx, drafting a clear and concise concept statement, defining scope and objectives (must include essential, desirable and excluded elements), developing the SimEx Charter which formalizes key elements and guides the process (p. 14-18).
- Planning: identification and definition of participant roles (players, design team, control team, observers), scenario design (narrative, challenges, constraints, injects, linearity or flexibility, timing), definition of rules of the game, choice of human and material resources, budget and schedule estimation (p. 19-38).
- Preparation: onboarding and training participants, rehearsals, finalizing tools and supports (p. 36-38).
- Delivery: conducting the SimEx under strict control, managing injects, simulating absent stakeholders, intervening to keep the scenario on track (p. 39-40).
- Closure: collecting feedback via questionnaires and interviews, drafting the final report with lessons learned, recommendations and action plan (p. 41-45).
Specific aspects:
- Clear taxonomy between tests (targeted evaluation of components), simulations (controlled environments mimicking reality), and dry runs (combination of both) (p. 8).
- Importance of a realistic, playable scenario adapted to objectives, with time management (acceleration, breaks) and clear communication to participants (p. 25-32).
- Precise rules of the game to ensure transparency, confidentiality, and encourage engagement without fear of sanction (p. 32-34).
- Necessity to involve a wide range of internal and external actors to reflect the real complexity of crises (p. 20-24).
- Use of injects to energize the simulation, provoke reactions, and test participant flexibility (p. 28-29).
- Modes of organization: physical, virtual or hybrid simulations, with preference for physical exercises to promote interaction (p. 31-33).
- Management of human and time resources adapted to complexity, with examples of effort required according to exercise type (p. 34-36).
- Established facts:
- Simulation exercises are proven tools to improve resolution authorities’ preparedness by testing plans, procedures and decision-making capabilities in a controlled environment (p. 4, 8).
- A clear classification of exercise types allows better targeting of objectives (creation, testing, training) and adaptation of methods (p. 8-13).
- Conducting a SimEx follows a structured process in phases: initiation, planning, preparation, delivery, closure, each with specific deliverables (p. 14-45).
- Involvement of multiple internal and external actors, with well-defined roles, is crucial for exercise success and credibility (p. 20-24).
- Hypotheses:
- The document assumes authorities already have plans and procedures on which to base exercises, notably for more advanced types (walkthrough, OSE, E2E) (p. 10-13).
- Exercise effectiveness depends on quality of preparation, scenario design and participant engagement (p. 18-38).
- Interpretations:
- Progressive increase in SimEx complexity is recommended to build expertise and organizational maturity (p. 16).
- Use of injects and dynamic scenario management promote learning and participant responsiveness (p. 28-29).
- Uncertainties:
- The document does not cover concrete results of past exercises nor quantitative effectiveness measures.
- Specific constraints of authorities (resources, organization, confidentiality) may limit full implementation of proposed best practices.
- The handbook provides a harmonized and detailed framework for conducting simulation exercises by resolution authorities, aiming to strengthen their operational preparedness and capacity to effectively manage banking crises (p. 4, 7).
- Authorities should adapt best practices to their context, considering size, complexity and specific objectives of each exercise (p. 7, 11).
- It is recommended to start with simple exercises (brainstorm, desktop) before progressing to more complex simulations (DME, OSE, E2E), to gradually increase maturity and expertise (p. 16).
- Clear definition of scope, objectives, roles, rules of the game and resources is essential to ensure exercise success and relevance (p. 14-38).
- Broad and diverse involvement of internal and external stakeholders, as well as rigorous management of injects and scenario, are key success factors (p. 20-29).
- Systematic collection of feedback and drafting of a closure report with recommendations and action plan allow capitalizing on experience and continuously improving practices (p. 41-45).
- The handbook offers several practical annexes (charter templates, inject examples, questionnaires, checklist) to facilitate implementation (p. 46-55).
- In summary, this guide is an essential tool for resolution authorities wishing to professionalize and standardize their simulation exercises within a coherent European framework.
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