Actions and notifications upon breaching an indicator

For indicator breaches to effectively fulfil their warning potential, in line with internal procedures specified in their recovery plans pursuant to Article 5(3)(a) of Commission Delegated Regulation (EU) 2016/1075, institutions should promptly and in any event:

• a. within one business day of the breach of the recovery plan indicator, alert the institution ’ s management body by activating the appropriate escalation process in order to ensure that any breach is considered and, where relevant, acted upon; and
• b. at the latest within one additional business day following the internal escalation referred to in
• (a) above, notify the recovery plan indicator breach to the relevant competent authority.

Where a recovery plan indicator has been breached, the management body of the institution should, also on the basis of Article 9(1) of Directive 2014/59/EU, assess the situation, decide whether recovery actions should be taken and notify its decision promptly to the competent authority.

The decision taken by the institution referred to in the previous paragraph should be based on a reasoned analysis of the circumstances surrounding the breach. Where that decision is for the institution to take action in accordance with the recovery plan, the competent authority should be provided with an action plan based on a list of potential credible and feasible recovery options for use in this stress situation and a time plan to remediate the breach. If no action has been decided, the explanation provided to the competent authority should clearly articulate the reasons why and, where appropriate, demonstrate how the restoration of specific types of indicators and their breaches is possible without the use of recovery measures.

Any action or option taken or considered by the institution following an indicator breach, even if previously not included in the recovery plan, should be deemed relevant for the communication with the competent authority. Indicatively, for that purpose, recovery options should include measures which are extraordinary in nature as well as measures that could also be taken in the course of normal business as referred to in Article 8 of Commission Delegated Regulation (EU) 2016/1075 (e.g. from contingency measures to the more extreme and radical recovery options).

The final decision on the potential activation of the recovery plan remains with the institution and it is not automatically triggered by a breach. After the breach notification, the competent authority should actively engage with the institution.

For the purposes of the previous paragraph, the competent authority should monitor (i) the proper and timely activation by the institution of escalation procedures and (ii) whether discussion on the activation of the plan happens at the right management level of the institution. The competent authority should assess whether the underlying reasoning provided by the institution for its decision to implement or not to implement recovery options is transparent and well reasoned.