The notes to the circular are intended to facilitate implementation of the requirements in compliance with the law.

The requirements at a glance

Overall responsibility for recovery planning lies with the institution's management. It is responsible for preparing, implementing and updating the recovery plan and for its implementation in the event of a crisis. Institutions are to prepare a strategic analysis identifying their corporate structure, core business lines and critical functions and their internal and external interconnectedness. Based on this information, institutions themselves are supposed to first assess which recovery options are feasible. Thereafter, BaFin will assess the options. Furthermore, the information derived from the strategic analysis should allow exposure risks for contracting parties in the financial system to be identified.

The objective of recovery planning is to enable institutions to manage crises on their own before BaFin has to step in. Institutions must therefore also consider recovery options that could impact the business model, and identify any such impacts in an impact and feasibility assessment. They are also required to establish indicators which allow them to take appropriate early action to restore their long-term financial viability. Quantitative indicators must establish appropriate thresholds to ensure adequate run-up time for deciding on certain recovery options.

Thereafter, the institutions must perform a scenario analysis, which is to cover both serious idiosyncratic and system-wide stress scenarios as well as slow- and fast-moving developments. The aim is to examine what risks could have a material adverse impact on the credit institution or group and whether or not the recovery options would be feasible and effective. Institutions are also required to describe the recovery actions for each and every stress scenario and assess the impact on the indicators.

Finally, credit institutions are required to prepare a communication plan aimed at ensuring effective internal and external communication.

Recovery planning

Requirements for institutions:

• Strategic analysis
• Impact and feasibility assessment
• Scenario analysis
• Communication plan

Principle of proportionality

Since the qualitative requirements under MaSan are based on the principle of proportionality, the content of the recovery plan also depends on the size, complexity and interconnectedness of the relevant credit institution or group of institutions as well as the type, scope and complexity of the business model and its associated risks.