Preparation and prevention Recovery and Resolution Act (SAG)
Banks required to prepare recovery plans
As a general rule, all banks are required to prepare a recovery plan. In keeping with the principle of proportionality, however, it is possible to simplify the requirements for certain banks. The idea behind the recovery plan is to ready banks for a potential crisis. The plan should set out, inter alia, indicators for identifying potential crises, escalation and decision-making processes, and the measures the bank can resort to without external assistance in order to safeguard or restore its financial stability. Fully fledged recovery plans need to be updated at least once a year – and on an ad hoc basis in the event of material changes – and sent to the supervisor. Once submitted, recovery plans are reviewed by the supervisor. The Regulation on the Minimum Requirements for the Design of Recovery Plans for Institutions (Verordnung zu den Mindestanforderungen an Sanierungspläne für Institute, or MaSanV) provides more detailed information on how a recovery plan should be organised.
Resolution authorities required to prepare resolution plans
Advance planning is likewise mandatory for resolution measures. However, unlike in the case of recovery plans, responsibility for preparing resolution plans lies with the respective resolution authority rather than the individual banks. Resolution plans should, in particular, contain the resolution actions that the resolution authority may take for the purpose of winding up a bank. One major objective of resolution planning is to identify and address any impediments to resolvability at an early stage. At the same time, resolution plans should also allow for a bank to be wound up in a (swift) orderly manner in a worst-case scenario. To ensure that plans remain up to date, they should be reviewed at least once a year and updated as necessary.