Ecb Recovery Planning

Recovery
planning
What more do banks need to do?
KPMG International
July 2017
kpmg.com/ecb
2 Recovery planning
Contents
01. Executive summary 03
02. Key questions for banks on recovery planning 04
03. Recovery planning 06
Key elements of a recovery plan 08
04. Regulation 10
05. Supervisory assessment of recovery plans 12
EBA thematic reviews of banks’ recovery plans 16
06. How KPMG can help 18
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and
is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved.
What more do banks need to do? 3
01 Executive
summary
Banks have always had contingency plans. But the financial
crisis demonstrated that many banks did not have viable
plans to recover from severe shocks.
As a result, EU legislation (the Bank reviews conducted by the European

Recovery and Resolution Directive Banking Authority (EBA) have revealed
“BRRD”) has been put in place to require inadequacies in some banks in the
banks to develop credible recovery plans. identification of core business lines
Contingency planning for more severe and critical functions; the range of
and wide‑ranging adverse scenarios scenarios used by banks; governance
should enhance the resilience of banks. arrangements; and the specification of
recovery options.
Banks should develop recovery plans
that identify credible options to survive Similarly, the European Central Bank
a range of severe but plausible stressed (ECB) and the UK Prudential Regulation
scenarios. This should be part of the Authority (PRA) have highlighted
good management of a bank, not just a areas for improvement in banks’
response to a regulatory requirement. recovery planning, including in the
The recovery plan should also cover content of recovery plans, the practical
governance and decision‑making; the usability of plans, the governance and
continuity of critical economic functions; decision‑making around preparing and
the specification of trigger points to activating recovery options, integrating
activate recovery options; and internal plans with stress testing and risk
and external communications. management, preparatory measures
and testing of plans, the identification
In turn, a bank’s supervisor should of critical functions, and the coverage
assess the credibility of the bank’s of material subsidiaries within group
recovery plan and, if necessary, recovery plans.
require the bank to amend its plan,
hold additional capital or liquidity, or Although this paper focuses on banks,
restructure its business in order to make there is a read‑across to other types of
the plan sufficiently credible. financial institution – including insurance
companies and asset managers – and to
In practice, some banks have struggled financial market infrastructure such as
to construct sufficiently credible central clearing houses.
recovery plans. A series of thematic
4 Recovery planning
Key questions for banks on recovery planning

Governance and Integration Scenarios, indicators and recovery options
EARLY WARN ING

EC KLI ST
INDICATO R CH
n y
la r
P ove
c
e
R
• Is recovery planning integrated with the bank’s • How complete are the stress scenarios? Do they
strategic planning, risk appetite, risk management cover a full range of stresses, both bank‑specific
and stress testing? and market‑wide? Do they consider and model
• Is recovery planning discussed and challenged at capital and liquidity simultaneously?
board and senior management level? Does this • Are early warning indicators and triggers in place
cover both the preparation and activation of to cover the full range of stress scenarios? Are
recovery options? there clear escalation processes? Do the indicators
• How is recovery planning included in Board packs? and triggers provide sufficient time for the bank
to act?
• Is the bank’s crisis management and
decision‑making process sufficiently clear? • How are the bank’s indicators linked to its risk data
aggregation and reporting?
• Is there a ‘playbook’ for senior management?
• What data are required and are these data readily
• Has the recovery plan been subject to internal audit
available? How current are these data?
(or external third party) review?
• Do the identified recovery options cover all the
triggers and stress scenarios?
Banks should develop recovery plans that

identify credible options to survive a range
of severe but plausible stressed scenarios.
Credibility Coverage
• Are recovery options sufficiently certain, robust and • Have core business lines, critical functions and
timely? Do they provide sufficient recovery capacity? critical shared services been identified and
• Do recovery plans respond to both bank‑specific and mapped to legal entities?
market‑wide stresses? • Would the implementation of each recovery
• How can a bank demonstrate the plausibility and plan option support or endanger these functions
credibility of its recovery options – has it tested and services?
its plans through both scenario planning and ‘live’ • Does the recovery plan cover all (material)
simulation exercises (fire drills)? subsidiaries?
• What lessons has the bank learned from these
simulation exercises? How has the bank’s recovery
plan changed as a result?
• How well prepared is the bank to activate its
02
recovery options?
• Has the bank analysed the impact of the simultaneous
exercise of its recovery options? Are some options
mutually exclusive?
• Have all the assumptions used in the valuations of
options been documented?
• How strong is the bank’s modelling and
valuations capability?
• How are change initiatives across the bank tracked?
What are their impact on the recovery plan?
6 Recovery planning
03
Recovery planning
The financial crisis revealed that many banks had
inadequate recovery plans. In particular, capital and
liquidity were often planned for separately, by the Chief
Financial Officer and the Head of Treasury respectively;
recovery plans were not discussed at board level, or
sometimes even by a bank’s executive committee;
recovery planning was based on insufficiently severe
assumed stresses, so recovery plans were not very
demanding; and many banks assumed that they would
be subject to a firm‑specific shock while the rest of the
market continued normally, so it would be possible for
the bank to borrow against collateral, raise new funding,
and issue bonds and equity.
As a result, many banks were unable to The key elements of a recovery plan are set
recover from the shock of the financial crisis out in the box on pages 8‑9. Banks should
without government intervention. consider a range of scenarios; develop a
range of recovery options that would enable
In response, recovery (and resolution) planning the bank to recover from these shocks –
became one the three main elements of the in particular to preserve the continuity of any
regulatory reforms directed at systemically critical functions provided by the bank; and
important financial institutions, together establish a clear link between the scenarios,
with capital surcharges and more intensive the trigger points that would require a
supervision. In terms of international decision to be taken on activating one or more
standards, new requirements for recovery recovery options, and the recovery options
and resolution planning were set out in themselves. The plan
the Financial Stability should be subject to high
Board’s (FSB) Key standards of governance,
Attributes of Effective documentation, testing
Resolution Regimes for Banks should consider a range and communications.
Financial Institutions of scenarios and develop a
(first published in 2011), The BRRD also requires
which in the EU were
range of recovery options supervisory authorities
transposed into the Bank that would enable the bank to to be granted the powers
Recovery and Resolution recover from these shocks. to intervene if a bank’s
Directive (BRRD) – this recovery plan is not
was finalised in 2014 for credible, including powers
national transposition to require a bank to:
and implementation by January 2015.
• Improve its recovery plan
The BRRD requires banks to produce credible • Specify a fuller set of scenarios, triggers
recovery plans to cope with a range of and recovery options
severe but plausible scenarios. It outlines the
• Enhance its contingency plans and
essential elements of a recovery plan, and
committed facilities
gives supervisory authorities the powers to
require banks to improve their plans if they are • Improve its resilience by holding more
not sufficiently credible. The BRRD extends capital and liquidity
the scope of recovery planning requirements • Change its strategy or business model to
to all EU credit institutions, but with the reduce its risk profile
intention that a proportional approach be taken • Change its operational structure, for
to how detailed and extensive each bank’s example to match more closely its
recovery plan needs to be. business activities with its legal entities.
8 Recovery planning
Key elements of 1. Governance 5. Critical functions

a recovery plan A bank’s recovery plan is owned by the
bank itself (in contrast to a resolution plan
A bank’s recovery plan should identify
the bank’s core business lines, critical
which ultimately has to be owned by the functions and critical services; and the key
resolution authority). The plan should be legal entities and jurisdictions from which
discussed and approved by the bank’s these are provided.
1. Governance board (unitary or supervisory).
Banks need to consider not only how
Executive management should be recovery options might preserve the
responsible for preparing and testing the continuity of critical functions, but also
2.Documentation
plan. Management information should be the possibility that some recovery options
and data
reported to senior management and the might endanger this continuity.
board on early warning indicators and any
breach of triggers. For systemically important banks (SIBs)
3. Integration the key issue here is to identify the critical
Clear decision‑making should be in place functions that most need to be preserved
for the activation of recovery options. because these functions are critical for
financial stability and the real economy.
2. Documentation and data
4. Scope A bank’s recovery plan should be This in turn requires a focus on the critical
supported by good documentation, data shared services (whether outsourced or
and management information. The plan provided from within a banking group) on
5. Critical needs to be clear, well understood and which these critical functions depend, and
functions capable of being activated by senior on how a bank can maintain its access to
management collectively, not just by a financial market infrastructure.
small number of key individuals.
For other banks the focus on key functions
6. Scenarios Data and management information reflects a risk‑based approach to the
should identify when triggers are supervisory assessment of recovery
breached or are likely to be breached. planning.
7. Triggers 3. Integration The criticality of functions will therefore

A bank’s recovery plan should be depend on:
integrated with the bank’s
• the nature of the function itself
8. Recovery • strategic, risk management and
• the systemic importance of the bank
options business decision making processes
supplying the function
• capital and funding planning, stress
• the scope for rapid substitutability by
testing approaches and capabilities,
other suppliers
9. Testing, feasibility and business continuity planning
and updating • the level at which criticality is
• capital and liquidity assessments
assessed – regional, industry sectors,
(ICAAP and ILAAP)
national, and other countries in which
• overall risk management, including a banking group operates.
10. Communication risk data aggregation and reporting.
For banks, critical functions are likely to
4. Scope include payments, custody, retail deposit
A bank’s recovery plan should consider taking and retail lending, specialist lending
the recoverability of the whole banking sectors (for example SMEs, industry sectors
group, and of any entity within the group and regions), clearing and settlement,
that performs a critical function. some wholesale market activities, and
market‑making in certain securities.
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity
with which the independent member firms of the KPMG network are affiliated. All rights reserved.
6. Scenarios 8. Recovery options 9. Testing, feasibility and updating

A bank’s recovery plan should be based A bank’s recovery plan should include a Although not all recovery options can
on a range of firm‑specific, market‑wide range of measures that the bank could be fully tested, a bank should have
and systemic scenarios, and combinations take to restore its financial position processes in place to check – as far
of these. The scenarios should be severe (and market confidence in its standing) as possible – that its recovery options
but plausible, and should cover both following an adverse shock. A bank are credible and could be activated
fast‑moving and slow‑moving events. therefore needs to identify credible successfully. This should include both
The scenarios should include, but not options to enable it to survive a range scenario analysis and simulation‑type
be limited to, the scenarios used by the of severe stressed scenarios, and to exercises.
bank for its stress testing (including both ensure that specific recovery options
the bank’s own internal stress tests and are in place to respond to each specific A bank should be clear about the
stress tests set by regulatory authorities). trigger point. feasibility of each recovery option –
the time it may take to implement, the
A bank should consider the potential The range of recovery options should time it may take before the benefits
impact of these scenarios on its: not be limited to raising capital or other materialise, potential obstacles to
funding, but should also include cost implementation, and any need for
• Capital, liquidity and profitability reduction (through lower bonuses and preparatory measures to facilitate the
• Credit rating, and the cost and dividends, and reducing operational implementation of each recovery option
availability of funding (including capital) costs) and more radical options such as (or the implementation of multiple
• Risk profile and operational capacity restructuring and the sale of assets or recovery options at the same time).
businesses.
• Group‑wide position, including A bank should analyse the impact of
material subsidiaries, and its each recovery option, including not only
intra‑group funding its intended purpose but the risk of any
• Critical functions and the key legal unintended side‑effects.
entities, businesses and jurisdictions A bank should develop a set
in which these functions are located of triggers and early warning These analyses should also include the
feasibility and impact of undertaking
• External counterparties. indicators to highlight when multiple recovery options at once,
7. Triggers recovery options might need inter‑dependencies among recovery
A bank should develop a set of triggers to be activated. options, and the effectiveness and
and early warning indicators to highlight limitations of recovery options during a
when recovery options might need to be market‑wide crisis.
activated. These should include: Taking specific recovery options would
A bank should update its recovery plan
• Capital not be automatic. Circumstances may
annually, or after significant changes
dictate variations in practice. But a bank
• Liquidity and funding to its legal or organisational structure,
should have identified a central case
business activities or its financial
• Profitability presumption of which recovery options
situation.
• Asset quality would be activated in response to each
• Internal forecasts of trigger, and should have in place clear 10. Communication
future performance escalation processes to decide which A bank’s recovery plan should include
recovery options should be activated. plans for internal communication,
• Market indicators (for example credit
external communication and keeping
rating, CDS spreads, stock price) A bank should not assume that public
its supervisors and other stakeholders
• Macroeconomic indicators support would be available, or that a
informed in the event that a recovery
• Loss of key staff central bank will provide liquidity beyond
option is activated.
pre‑announced arrangements (including
• Other triggers relevant to the
acceptable collateral).
bank’s business.
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss
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All rights reserved.
10 Recovery planning
04
Regulation
The EBA has issued a number of technical
standards and guidelines to supplement
the BRRD. These include regulatory
technical standards on the content and
on the assessment of recovery plans;
recommendations on the development
of recovery plans and on the coverage
of entities in group recovery plans; and
As part of the implementation of guidelines on recovery plan indicators, on
the BRRD, the EBA and national the range of scenarios to be used, and on
business reorganisation plans.
regulators have issued various
regulations and guidelines on The ECB has not issued specific guidance
recovery planning. on recovery plans, although parts of its
more general guidance refer to recovery
planning. For example, the ECB’s guidance
on ICAAP refers to the importance
of consistency between ICAAPs and
recovery plans, bringing together adequate
capitalisation in normal times with
restoring viability when a bank suffers
from a severe adverse shock.
In the UK, the Prudential Regulation

Authority (PRA) has supplemented
the BRRD and the EBA standards and
guidance with a supervisory statement on
recovery planning, setting out templates
for how banks should describe the content
of their recovery plans and the potential
impact of their recovery options under
both bank‑specific and market‑wide stress
scenarios. This supervisory statement was
first published in December 2013, and
updated in January 2015 to incorporate the
provisions of the BRRD. In June 2017 the
PRA consulted on further revisions to its
supervisory statement.
© 2017 KPMG International Cooperative (“KPMG International”). KPMG

International provides no client services and is a Swiss entity with which the
independent member firms of the KPMG network are affiliated. All rights reserved.
All banks should have clear and tested strategies

for recovering from a range of potential stresses,
and they should have an early warning system
to alert them that a stress is approaching.
Bank of England Quarterly Bulletin, Q4 2016
The proposed revisions to the PRA’s supervisory statement reflect the

PRA’s findings when reviewing recovery plans and include:
• Governance – the governance of • Playbooks – banks should

a recovery plan should cover its produce a concise implementation
production and sign off, not just guide ('playbook')
its implementation • Communication plan –
• Recovery options – banks the communication plan should be
should provide sufficient analysis tailored to each recovery option
to justify the choice, impact, • Ring fenced banks – a group
timeliness and dependencies of containing a UK ring fenced bank
their recovery options should ensure that its recovery
• Indicators – banks should monitor plan reflects adequately the
projected outcomes and trends, scenarios, indicators and recovery
not just actual developments options specific to the ring
• Wind down analysis – banks fenced subgroup
should explore in more depth how • Other revisions – relate to banks’
parts of their business could be assessments of their recovery
wound down, in particular their capacity; stress testing; and the
trading books information template.
• Fire drills – banks should perform
a fire drill exercise to test parts
of their recovery plan, not least
governance arrangements and
how specific recovery options
could be executed in practice
05
Supervisory assessment
of recovery plans
The EBA, the ECB and the PRA have been assessing
the credibility of banks’ recovery plans. They have
provided feedback to banks collectively through
published benchmarking reports from the EBA, and
individually through feedback letters to individual
banks from the ECB and from national supervisory
authorities, including the PRA.
The EBA has conducted four ‘benchmarking reports’ in developing and updating a bank’s recovery plan;
(thematic reviews) on various aspects of recovery ensuring that indicators are reported promptly and
planning and found a number of shortcomings in the effectively to the relevant internal committees;
identification of critical functions, the range and detail putting in place adequate procedures for escalating
of the scenarios used by banks, the governance and problems and enabling quick decisions about the use
coverage of recovery plans, and of recovery options; and
the specification and feasibility identifying clearly individual
of recovery options (see the responsibilities within these
box on pages 16‑17). governance processes.
Banks are, of course, required
The ECB is also largely at the to share their recovery plans Second, recovery options
benchmarking stage, and has with supervisors. And that’s need to be sufficiently
highlighted the considerable comprehensive to enable a
variation in the size and where we see the benefits of bank to respond effectively
quality of the recovery plans European banking supervision. to a range of scenarios;
of major banks in the EU We receive recovery plans well thought through;
banking union. On the size and capable of being
of recovery plans, the ECB is from banks across the euro implemented within the
concerned that short plans are area, enabling us to benchmark planned time period. On this
often incomplete, while very and establish best practices. last point, some banks
long plans may be difficult may be overestimating
to implement during a crisis This will help us in assessing the speed within which,
when time is of the essence. future recovery plans and in for example, the sale of a
On quality, some plans were providing better guidance to significant legal entity could
quite advanced and established in practice be achieved.
best practices, while others did banks and to our supervisors.
not meet the requirements set Third, banks should ensure
Speech by Danièle Nouy, Chair of the
out in the BRRD. that material entities are
Supervisory Board of the ECB, Jan 2017
covered in group recovery
The ECB has highlighted four plans, in particular for
main areas in its initial feedback cross‑border banks.
to banks. First, recovery planning needs to be
integrated into each bank’s overall risk management Fourth, banks should use standardised reporting
framework. Some banks have found this difficult. templates to provide complete, comparable and
Specific issues here include the role of the Board current data to their supervisor.
The PRA conducts detailed assessments of banks’ • Continuous updating and testing of recovery
recovery plans to assess the credibility of the key plans, including through the use of both
components of these plans – identifying critical scenario planning and ‘live’ simulation exercises.
functions, recovery options, preparatory measures,
• Preparatory measures to ensure, as far as
indicators, scenarios, governance, testing, and
possible, that recovery options can be decided
communication.
upon and activated in sufficient time.
From these assessments the PRA has emphasised • Adequate identification of core business lines
in its feedback to banks the importance of: and critical functions, and the mapping of these
to legal entities.
• The clear articulation of stress scenarios and
their likely impact on material legal entities, core • Analysis of the interactions between
business lines, critical economic functions and recovery options, operational continuity and
critical services. critical functions.
• Sufficient detail on each • Coverage of material
recovery option, including non‑UK entities
the quantification of its in the analysis of
impact, the costs of its scenarios, indicators
implementation, external
The ECB is also largely at the and recovery options.
impacts, feasibility analysis benchmarking stage, and has
• Valuation techniques
and option‑specific highlighted the considerable that take account of the
communication planning.
variation in the size and quality potential impact of
• Clarity of the elements of of the recovery plans of major bank‑specific and
a recovery plan, and how market‑wide stresses
they fit together. banks in the EU banking union. on the cost of funding
and the price of assets
• The usability of recovery
and businesses.
plans – the plan should
not simply be a document produced as In describing its supervisory approach, the PRA has
a compliance exercise but a ‘living’ plan also highlighted that it looks across the banking
developed from the engagement of the bank’s sector as a whole, to assess market‑wide stresses
board and senior management in designing, and the difficulties that may arise when a number
challenging and testing the plan. of banks are seeking to activate similar recovery
options simultaneously; works with overseas
• The plan should be an integral part of the bank’s
supervisors on the recovery plans of cross‑border
risk management framework, and be consistent
banks; and embeds the assessment of recovery
and integrated with the bank’s stress testing,
plans with its work on banks’ stress testing,
ICAAP and ILAAP.
strategic planning and risk management. There is
• The calibration of recovery indicators and the also a direct link to the UK’s new Senior Managers
management information that would be required Regime, with recovery planning being a prescribed
to support decision‑making on the use of responsibility that has to be assigned to a senior
recovery options. executive of each bank.
A KPMG survey1 of 21 mid‑sized banks in the UK showed that they

self‑assess themselves as being strongest in having in place:
A strong suite of forward looking and well calibrated

recovery indicators and early warning signals 33%
A well structured and usable plan 22%

Sufficiently detailed option analysis with
consideration of preparatory measures 22%
A recovery plan that is embedded into
risk management and reporting 17%
Scenario analysis and fire drills 0%
As a result, banks viewed the areas that require the most attention
in 2017 as being:
Scenario analysis and fire drills 29%
Option analysis and preparatory measures 24%

Embedding recovery planning into risk
management and reporting
19%
Indicators and early warning signals 19%
1: How to keep up with regulatory expectations and industry good practices, 30 March 2017
EBA thematic reviews of banks’ recovery plans

The EBA has published the results of four thematic reviews of banks recovery plans.
These show a number of shortcomings that banks' need to address.
Critical functions Scenarios Governance
Review published in March 2015, based on Review published in December 2015, based Review published in July 2016, based on
a review of recovery plans from 27 banks on a review of recovery plans from 19 banks a review of recovery plans from 26 banks
headquartered in 12 EU member states. headquartered in 10 EU member states. headquartered in 12 EU member states.
Key findings: Key findings: Key findings:

• Some banks had not identified the • Many banks considered only a limited • Some banks’ recovery plans did not
critical functions they provided range of scenarios include sufficiently clear and detailed
• Even where critical functions were • Some of these scenarios were vague, descriptions of the recovery plan
identified, some banks based this with little or no detail on the underlying development process and the roles
only on a judgmental evaluation and quantitative assumptions and functions of the individuals and
qualitative considerations, without • Scenarios were not well linked to core committees responsible for developing
this being supported by quantitative business lines and critical functions the recovery plan
information and objective and • Recovery plan scenarios were not • Almost all recovery plans were approved
detailed analysis always well linked to the internal and by the board, and half were reviewed by
• The identification of critical functions regulatory scenarios used by the bank an internal audit function
was mostly limited to a bank’s home for stress testing, including reverse • Half the recovery plans relied only on
national market stress testing general governance procedures for
• Some banks did analyse critical • The impact of scenarios on a bank’s escalation and decision‑making, not
functions on the basis of systemic capital, liquidity, profitability, risk specific procedures for different options
importance and substitutability, using a profile and operations was not always • Most banks had procedures and
range of quantitative data complemented clear, making it difficult to link each responsibilities in place for updating
by clear and well‑documented expert scenario to a set of triggers and a set of their recovery plans, but the detail
judgment. However, only a few banks corresponding recovery options provided for updates varied significantly
undertook more complex analysis • Scenarios were not sufficiently across banks
to assess contagion effects and ‘dynamic’ – they did not include a • Most banks developed their recovery
interdependence with other markets timeline for the breach of triggers, the plans with the benefit of input from
• Only some banks included an analysis decisions that needed to be taken and group level, but not from subsidiaries.
of critical shared services, reflecting the the implementation of recovery options. As a result, most plans did not ensure
risk that a disruption of critical shared appropriate coverage of material
services could threaten the continuity of subsidiaries.
critical functions
• The analysis of critical functions was
not effectively linked to other key
elements of a bank’s recovery plan,
such as recovery options, triggers
and governance
• Most banks did not analyse all aspects
of the impact of recovery options on
critical functions, including the possibility
that some options could endanger the
continuity of critical functions.
Recovery options
Review published in March 2017, based on a review of recovery plans from 23 banks
headquartered in 12 EU member states.
Key findings: • However, few plans specified whether

• Overall, banks’ recovery plans provided operational continuity would be achieved
a good overview of recovery options and when implementing a specific option
clear improvements could be seen with • Most banks identified potential risks and
regard to impact analysis, interaction with impediments to the execution of recovery
the scenarios and the assessment of options and, to a lesser extent, outlined
credibility, when compared with recovery potential mitigating actions to remedy
plans produced before the BRRD them. But many plans contained only a
• All the recovery plans included some limited and generic suite of preparatory
analysis of the credibility and feasibility of measures to facilitate the implementation
recovery options, but this did not always of options
extend to key factors that might influence • Half of the banks in the sample did not
the extent to which recovery measures link their recovery options sufficiently
could be implemented quickly and closely to their governance and
effectively in situations of financial stress decision‑making processes
• Many recovery plans lacked a detailed • The link between triggers and recovery
assessment of the feasibility of the options was not always clear
recovery options under each scenario • Almost all recovery plans provided some
• Similarly, although all banks estimated data on the financial impact on key capital
timeframes for executing recovery and liquidity metrics. However, in almost
options, many of them did not provide half of the plans the level of detail on
sufficient detail to enable an assessment which the calculations were based was
of whether such timelines were realistic extremely limited
and conservative • Only half of the recovery plans identified
• Most recovery plans included some recovery options available at subsidiary
consideration of the impact of recovery level, and where they did these options
options on critical functions and core almost always involved capital or liquidity
business lines, and detailed information support from the parent.
on operational impact and continuity,
including on access to financial
market infrastructures, management
information systems, IT services, and
risk management
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International

provides no client services and is a Swiss entity with which the independent member firms
of the KPMG network are affiliated. All rights reserved.
06
How KPMG can help

Preparing a bank’s recovery plan
Taking a structured approach to collecting and Governance
analysing information about the bank, and Helping banks to link their
identifying gaps against the target state of a recovery planning to their wider
broad ranging and credible recovery plan. risk management framework,
including its integration into a
Response to supervisor(s) bank’s existing management
To issues raised by processes, risk appetite and risk
their supervisor(s) in tolerance, risk data aggregation
feedback letters and EBA and reporting, early warning
benchmarking reviews. EARLY WARNING
INDICATOR CHECKLIST
indicators and other management
information, and stress testing.
KPMG member
firms have
expertise across
Europe in:
Quality assurance Indicators and thresholds

Reviewing a bank’s recovery Including both early warning
plan, including against the key indicators and trigger points for the
required elements and good activation of recovery options.
practice observed in other banks,
and helping to ensure that the
recovery plan is described logically
Recovery options
and not at excessive length.
Identifying a wide range of recovery options
to cover all scenarios, valuing recovery options
under a range of scenarios, and testing the
feasibility of these options. For banks with large
trading books this would include a winding down
of part or all of the bank’s trading book.
Contact us
Dr. Henning Dankenbring Fiona Fry
Partner, Co‑Head KPMG’s ECB Office Partner, Head of FS Regulatory Center
EMA region of Excellence
T: +49 69 9587 3535 EMA region
E: hdankenbring@kpmg.com T: +44 20 7694 2364
E: fiona.fry@kpmg.co.uk
Daniel Quinten Marcus Evans

Partner, Co‑Head KPMG’s ECB Office Partner, KPMG’s ECB Office
EMA region EMA region
T: +49 89 9282 4910 T: +44 20 7311 5162
E: dquinten@kpmg.com E: marcus.evans@kpmg.co.uk
Eric Cloutier Clive Briault

Managing Director, KPMG’s ECB Office Senior Adviser, FS Regulatory Center of Excellence
EMA region EMA region
T: +44 20 7694 3364 T: +44 20 7694 8399
E: eric.cloutier@kpmg.co.uk E: clive.briault@kpmg.co.uk
Michael Meyer Iain Cummings

Partner, Financial Services Partner, Financial services
KPMG in Germany KPMG in the UK
T: +49 173 5647452 T: +44 20 7311 5240
E: mmeyer5@kpmg.com E: iain.cummings@kpmg.co.uk
kpmg.com/ecb
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Ecb Recovery Planning

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Ecb Recovery Planning

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Recovery

01. Executive summary 03

02. Key questions for banks on recovery planning 04

03. Recovery planning 06

Key elements of a recovery plan 08

05. Supervisory assessment of recovery plans 12

EBA thematic reviews of banks’ recovery plans 16

06. How KPMG can help 18

As a result, EU legislation (the Bank reviews conducted by the European

Key questions for banks on recovery planning

EARLY WARN ING

Banks should develop recovery plans that

Key elements of 1. Governance 5. Critical functions

7. Triggers 3. Integration The criticality of functions will therefore

6. Scenarios 8. Recovery options 9. Testing, feasibility and updating

In the UK, the Prudential Regulation

© 2017 KPMG International Cooperative (“KPMG International”). KPMG

All banks should have clear and tested strategies

The proposed revisions to the PRA’s supervisory statement reflect the

• Governance – the governance of • Playbooks – banks should

A KPMG survey1 of 21 mid‑sized banks in the UK showed that they

A strong suite of forward looking and well calibrated

A well structured and usable plan 22%

Scenario analysis and fire drills 0%

Scenario analysis and fire drills 29%

Option analysis and preparatory measures 24%

Indicators and early warning signals 19%

EBA thematic reviews of banks’ recovery plans

Critical functions Scenarios Governance

Key findings: Key findings: Key findings:

Key findings: • However, few plans specified whether

© 2017 KPMG International Cooperative (“KPMG International”). KPMG International

How KPMG can help

Quality assurance Indicators and thresholds

Daniel Quinten Marcus Evans

Eric Cloutier Clive Briault

Michael Meyer Iain Cummings

CREATE. | CRT082638 | July 2017

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