8.3.2 The BRRD requirements: recovery and resolution plans

320. Under the BRRD institutions have to assess their business and activities and they have to draw up a recovery1 plan. The resolution authority responsible for carrying out the powers and authorities regulated in the BRRD is also required to draw up a resolution plan.2 The objective of a recovery plan is “to identify options to maintain or restore the viability and financial position of an institution or group when it is subject to severe stress”.3 A recovery plan addresses the going-concern principles for institutions and should help institutions and supervisory authorities to assess which actions need to be taken to prevent an institution from failing and thereby retaining the critical functions of that bank for the financial markets. A recovery plan is drawn up by the institution itself.

321. A resolution plan is dependent on the resolution authority’s analysis to determine “whether [the institution’s] failure and subsequent winding up under normal insolvency proceedings would be likely to have a significant negative effect on financial markets, on other institutions, on funding conditions, or on the wider economy”,4 and is drawn up by the resolution authority. Resolution planning “is an essential component of effective resolution. Authorities should have all the information necessary in order to identify and ensure the continuance of critical functions”.5 The resolution plan contains all the actions and steps that need to be taken if the institutions should be wound down. These requirements thus fall within the gone-concern approach discussed above.