DS-2.1.7
The Recovery Plan must identify possible recovery measures, recovery options and the necessary steps and time needed to implement such measures, as well as assess the associated risks. An effective Recovery Plan must at least consider the following:
(a) Governance arrangements and escalation process following a trigger event;
(b) Recovery triggers must be well-defined and tailored to the full range of risks faced by the bank. The threshold level for triggers must be calibrated with impact on the bank's economic capital and set out clearly in the bank's recovery plan;
(c) Actions or responses that should occur when triggers are breached; there should be an expectation that breach of a trigger causes a predetermined escalation and information process up to Board and Senior Management level;
(d) A detailed explanation and analysis, illustrating how the triggers were calibrated, as well as highlighting the effectiveness of the triggers;
(e) Incorporating qualitative triggers in their consideration of whether a recovery response is necessary and, if so, what kind of response would be appropriate;
(f) Incorporating the triggers for recovery planning into the bank's overall risk management framework. Recovery triggers must be aligned with (but not limited to) existing triggers for liquidity or capital contingency plans, early warning indicators and the bank's risk appetite;
(g) Triggers for recovery planning must be complemented by early warning indicators that alert the bank to emerging signs of stress, but that do not yet give rise to a triggering event;
(h) Use at least one market-wide (systemic) stress scenario and one bank-specific (idiosyncratic) stress scenario, as well as a combination of systemic and idiosyncratic stress scenarios to assess the robustness of their Recovery Plans and to assess which recovery options would be effective in a range of stress situations; and
(i) Allocation of losses to shareholders and unsecured and uninsured creditors in a manner that respects the hierarchy of claims.
July 2018