Title II – Specification of minimum criteria for the assessment of the business reorganisation plan

The business reorganisation plan should show that the management body or the person or persons appointed in accordance with Article 72(1) of Directive 2014/59/EU of the institution or entity referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU:

1. support the business reorganisation plan and commit to implement it;

2. have appointed one or more departments responsible for carrying out the business reorganisation plan and have identified the individual(s) assigned to senior management role(s) of such department(s).

3. have sought the cooperation and support of key internal and external stakeholders to the business reorganisation plan, such as:

3.1. the Board of Directors and the executive committee of the institution or entity referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU, who shall be ultimately responsible for the reorganisation strategy; 3.2. the competent authorities and resolution authorities outside the EU that may be responsible for parts of such institution or entity.

2.1 The business reorganisation plan should demonstrate with a high level of confidence that its application will restore the long-term viability of the institution or entity referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU. Such demonstration should rely on credible assumptions, a scenario-based analysis and appropriate and concrete performance indicators capturing the performance of the entire group, the entities and the business lines that are not to be wound down or sold.

2.2 Any assumptions and performance indicators should be compared with appropriate sector-wide benchmarks and should be in line with available macro-economic forecasts.

2.3 Where the business reorganisation plan sets out a description of how the institution or entity referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU will be able to provide an acceptable financial return, such return should be assessed by comparison to relevant peer institutions or entities and historical data.

2.4 The risks taken into account by the viability analysis in the business reorganisation plan should be consistent with institution-specific and broader risks identified by the competent authority, the central bank or other relevant authority or institution in the relevant markets.

2.5 The worst-case scenario should reflect a significant, albeit plausible, change in the underlying assumptions in comparison to the base-case scenario. These changes should focus in particular on the assumptions that are more relevant for the institution under reorganisation.

2.6 Restoration of the long-term viability, even under the worst-case scenario, should not involve further application of resolution tools beyond the scope of the resolution scheme under implementation when the business reorganisation plan was drawn up. The resolution authority should also ensure that the reorganisation of the institution or entity does not give rise to any material impediments to resolvability. If such material impediments are identified, the resolution authority should notify the institution or entity referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU according to the procedure set out in Article 52(8) of Directive 2014/59/EU and outline relevant actions for how those impediments could be addressed.

2.7 The business reorganisation plan should demonstrate that the institution or entity referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU is capable of fulfilling its internal capital adequacy assessment process in accordance with the relevant provisions of Directive 2013/36/EU.¹⁰

2.8 In order to determine whether the business reorganisation plan is reasonably likely to restore the long-term viability of the institution or entity referred to in points (b), (c) and

• (d) of Article 1(1) of Directive 2014/59/EU, both authorities should assess the business reorganisation plan using the relevant provisions of the business model analysis framework and methodology, as provided in the EBA guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP)¹¹ . In this respect the resolution authority should not be expected to use such EBA guidelines beyond what can be assumed by its experience and competence.

¹⁰ Directive 2013/36/EU, OJ L 176, 27.6.2013, p. 338. 11 EBA/GL/2014/13, 19 December 2014.

3.1 The information provided in the business reorganisation plan and its underlying assumptions regarding the causes that have triggered the resolution and the reorganisation strategy should be consistent with the assessment carried out by the resolution authority and the competent authority and the valuation that informed the determination of whether the conditions for resolution were met in accordance with Article 36(4)(a) of Directive 2014/59/EU.

3.2 Any analysis of the external operating environment included in the business reorganisation plan should be consistent with the analysis of opportunities and threats in the relevant markets, as determined by the resolution authority and competent authority when carrying out their tasks.

3.3 The business reorganisation plan should be feasible and realistic. In particular:

3.3.1 any internal and governance measures should be carried out taking into account potential implementation impediments, such as labour law or other contractual requirements;

3.3.2 the reorganisation strategy, measures, milestones and performance indicators contained in the business reorganisation plan should take into account the interdependencies between the legal entities and business lines in the group. These might include commercial, funding and operational interdependencies;

3.3.3 the reorganisation strategy, the individual measures, the milestones and the performance indicators contained in the business reorganisation plan should take into account the situation in the relevant markets; 3.3.4 any divestment of assets, entities or business lines envisaged by the business reorganisation plan should be tailored to the situation in the relevant markets. The timing and scope of such divestments should also take into account the interest and possibility of investors acquiring them;

3.3.5 the benchmark or valuation used to calculate any expected proceeds from divestment of assets, entities or business lines envisaged by the business reorganisation plan should be prudent, reliable and realistic.

3.4 The reorganisation period should be as short as possible, taking into account:

3.4.1 the need to allow sufficient time to implement the reorganisation strategy and measures in the most effective way, in order to restore long-term viability;

3.4.2 standards and practice in the relevant markets;

3.4.3 the need to maintain financial stability.

4.1 The business reorganisation plan should be consistent with any business plans that have been prepared by the institution or entity and submitted to any other authority (e.g. competition or securities and markets authorities) following regulatory or legal obligations.

4.2 Where the Union State aid framework is applicable, the resolution authority and the competent authority, when assessing the business reorganisation plan, should cooperate with the European Commission on the assessment and viability analysis, which is an objective of both the business reorganisation plan and the restructuring plan.

4.3 Where the business reorganisation plan includes measures already featuring in the latest versions of previously prepared recovery or resolution plans for the institution or entity referred to in points (b), (c) and (d) of Article 1(1) of Directive 2014/59/EU, these should be limited to elements which remain relevant following that institution’s or entity’s failure and resolution and the situation in the relevant markets.

4.4 The reorganisation strategy should not undermine the resolution objectives and principles laid down in Articles 31 and 34 of Directive 2014/59/EU, as applied by the resolution authority. The resolution authority and the competent authority should satisfy themselves that implementation of the reorganisation strategy and measures do not adversely affect the critical functions of the institution or entity referred to in points (b),

• (c) and (d) of Article 1(1) of Directive 2014/59/EU, the functioning of the financial system and overall financial stability.

5.1 Any milestones and performance indicators contained in the business reorganisation plan should be sufficiently concrete to enable their monitoring, in accordance with the reporting obligations referred to in Article 52(10) of Directive 2014/59/EU.

5.2 The content of the business reorganisation plan and the progress report should allow the resolution authority and the competent authority to conclude that the business reorganisation plan is implemented correctly and will achieve its objectives.

5.3 The resolution authority and the competent authority should ensure adequate arrangements in order to carry out the monitoring, in particular in relation to the timely flow of information regarding the implementation of the business reorganisation plan.

5.4 Where the resolution authority or the competent authority appoints an independent expert to verify in full or in part the assumptions and the effect of the measures contemplated by the business reorganisation plan, such independent expert should meet a standard of independence equivalent to the criteria for independence specified by Part Five, Title I of the Commission Delegated Regulation [XXX/XXX] supplementing Directive 2014/59/EU (Independence of valuers).