Commission Delegated Regulation (EU) 2016/1400 of 10 May 2016 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the minimum elements of a business reorganisation plan and the minimum contents of the reports on the progress in the implementation of the plan (Text with EEA relevance)
Definitions
For the purposes of this Regulation, the following definitions apply:
(1)
‘reorganisation period’ means the period, which shall be of a reasonable timescale, between the application of the bail-in tool and the moment when the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU under resolution is expected to have restored its long-term viability, during which measures included in the business reorganisation plan are implemented;
(2)
‘base case’ means the business scenario which the management body or the person or persons appointed to operate the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU consider as most likely to materialise in the process of restoring the long-term viability of the institution or entity.
Strategy and measures
1. The business reorganisation plan shall include all of the following:
(a)
a historic and financial account of the factors that contributed to the difficulties of the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU including the relevant performance indicators that deteriorated in the period preceding the resolution and the reason for their deterioration;
(b)
a short description of crisis prevention and crisis management measures, where such measures have been applied by the competent authority, the resolution authority or the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU before the submission of the business reorganisation plan;
(c)
a description of the business reorganisation strategy and the measures intended to restore the long-term viability of the institution or entity during the reorganisation period including a description of each of the following:
(i)
the reorganised business model;
(ii)
the measures implementing the business reorganisation strategy at group, entity and business line level;
(iii)
the target duration of the reorganisation period and important milestones;
(iv)
the interaction with the resolution authority and the competent authority;
(v)
the strategy regarding the involvement of relevant external stakeholders such as labour unions or organisations;
(vi)
the internal and external communication strategy for the business reorganisation measures.
2. Where parts of the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU are to be wound down or sold, the reorganisation strategy referred to in paragraph 1(c) of this Article shall identify all of the following:
(a)
the relevant entity or business line, the method for the winding down or sale, including the underlying assumptions and any possible expected losses;
(b)
the expected timescale;
(c)
any financing or services provided by or to the remaining institution or entity.
3. Any proceeds from the divestment of assets, entities or business lines envisaged by the business reorganisation plan shall be calculated prudently and with reference either to a reliable benchmark or valuation, such as an expert valuation, a market sounding exercise or the value of similar business lines or entities. The calculation shall take into account the likelihood of loss realisation.
4. For the parts of the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU that will not be wound down or sold, the business reorganisation plan shall indicate ways to remedy any shortcomings in their operation or performance that may have an impact on their long-term viability, even if these shortcomings are not directly related to the failure of that institution or entity.
5. The measures set out in the business reorganisation plan shall take into account the strengths and weaknesses of the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU and its reorganised business model by reference to the economic and market environment in which it operates.
6. The reorganisation strategy may include measures previously identified in the recovery plan or in the resolution plan, provided the resolution plan is accessible to the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU and when such measures remain valid following resolution. This option does not imply any obligation on the resolution authority to share the resolution plan with the management body or with the person or persons appointed in accordance with Article 72(1) of Directive 2014/59/EU.
Financial performance — Regulatory requirements
1. The business reorganisation plan shall include the projected financial performance of the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU during the reorganisation period and demonstrate how long-term viability will be restored. It shall set out in particular:
(a)
the costs and the impact of the reorganisation on the profit and loss statement and the balance sheet of the institution or entity;
(b)
a description of the funding requirements during the reorganisation period and potential sources of funding;
(c)
the way the institution or entity will be able to operate covering all its costs, including depreciation and financial charges and provide an acceptable financial return by the end of the reorganisation period;
(d)
a post-resolution balance sheet reflecting the new debt and capital structure and the write-down of assets based on the valuation conducted pursuant to Article 36(1) of Directive 2014/59/EU or the ex-post definitive valuation referred to in Article 36(10) thereof;
(e)
a projection of the key financial metrics at group, entity and business line level, relating to, in particular, liquidity, loan performance, funding profile, profitability and efficiency.
2. The business reorganisation plan shall set out the actions the institution or entity will take to ensure that it is able to fulfil all the applicable prudential and other regulatory requirements on a forward-looking basis as quickly as possible and at the latest by the end of the reorganisation period, including the minimum requirements for own funds and eligible liabilities within the meaning of Article 45 of Directive 2014/59/EU.
Viability assessment
1. The business reorganisation plan shall contain sufficient information to allow the resolution authority and the competent authority to assess the feasibility of the proposed measures. The business reorganisation plan shall set out at least:
(a)
the assumptions regarding the expected macroeconomic and market developments in the base case, compared with appropriate sector-wide benchmarks;
(b)
a concise presentation of alternative reorganisation strategies or set of measures and justification as to why the measures in the business reorganisation plan have been chosen to restore 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, while respecting the resolution objectives and principles.
2. The business reorganisation plan shall include the necessary information to enable the resolution authority or the competent authority to conduct a detailed analysis of the business reorganisation's impact on the critical functions of the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU and on financial stability.
3. The business reorganisation plan shall include an analysis of an alternative set of key underlying assumptions, in which best-case and worst-case scenarios are considered. Restoration of long-term viability shall be possible under all scenarios, although the period, the measures and the financial performance may differ.
4. With regard to the best-case and worst-case scenarios referred to in paragraph 3, the business reorganisation plan shall include a summary of the key information used in developing each scenario and the performance of the institution or entity referred to in points (b), (c) or (d) of Article 1(1) of Directive 2014/59/EU under each scenario. Such summary shall include in particular:
(a)
the underlying assumptions, such as key macroeconomic variables;
(b)
the projection of the profit and loss statement and the balance sheet;
(c)
the key financial metrics at group, entity and business line level.
Implementation and adjustments
1. The business reorganisation plan shall include specific, appropriate and at least quarterly implementation milestones and performance indicators. These milestones and indicators may be adjusted, in line with the process laid down in paragraph 2.
2. The business reorganisation plan shall provide for the possibility for the management body or any person or persons appointed in accordance with Article 72(1) of Directive 2014/59/EU to adjust the reorganisation strategy or individual measures where their implementation is no longer expected to contribute to the restoration of the long-term viability within the contemplated timescale. Such adjustments shall be communicated to the resolution authority and the competent authority in the progress report on the implementation of the business reorganisation plan referred to in Article 6. Where necessary for reasons of urgency, such adjustments may also be communicated through extraordinary reports.
3. The management body or the person or persons appointed in accordance with Article 72(1) of Directive 2014/59/EU shall not deviate from the implementation of the business reorganisation plan before obtaining approval for the adjustments according to the procedure set out in paragraphs (7), (8) and (9) of Article 52 of Directive 2014/59/EU.
Progress report
1. The progress report to be submitted to the resolution authority pursuant to Article 52(10) of Directive 2014/59/EU shall include a review and assessment of the progress of the implementation of business reorganisation plan, covering at least the following:
(a)
the milestones that are met, the measures that are realised and how their impact compares to that envisaged by the business reorganisation plan;
(b)
the performance of the institution or entity and a comparison with the forecasts of the business reorganisation plan and previous progress reports;
(c)
the reasons why any milestones or performance indicators have not been achieved and proposals to remedy the delays or shortfalls;
(d)
any other issues arising in the execution of the business reorganisation plan that may prevent the restoration of 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;
(e)
the upcoming measures and milestones and an assessment of how likely they are to be met;
(f)
updated financial performance projections;
(g)
where necessary and justified, a proposal for adjustments to individual measures, milestones or performance indicators, in accordance with Article 5(2).
2. Resolution authorities may at all times require the management body or the person or persons appointed in accordance with Article 72(1) of Directive 2014/59/EU to provide information relating to the implementation of the business reorganisation plan.
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
