The financial crisis of 2008 showed that there were insufficient rules to deal with failing banks. Through changes in regulation Recovery and Resolution rules have been implemented around the world through various sets of regulation. The rules provide standardised tools and powers for national authorities to deal with failing banks, with the intention of minimising the negative impact of bank failures on taxpayers, without jeopardising the financial system as a whole.
Recovery is the first stage. It is implemented whilst the bank is still a ‘going concern’. A bank must write a recovery plan showing how it intends to restore its viability in a timely manner should it find itself in a severe stress situation, and how it will continue to provide critical services to the economy.
Key learning objectives:
Comprehend why Recovery and Resolution regulation is required
Understand the Recovery stage of Recovery and Resolution