The recovery plan must include a series of recovery indicators with recovery plan triggers calibrated in a manner that will warn with sufficient notice of an upcoming stress and allow the Financial Institution to take prompt corrective action through its recovery plan.
6.2
The breach of a recovery plan trigger does not necessitate the automatic or immediate implementation of recovery options. However upon a breach:
6.2.1
The Senior Management must be notified immediately and must assess the nature of the breach, and determine whether the recovery plan needs to be activated;
6.2.2
The board of directors must be notified within 1 business day of the breach of the recovery plan indicator or immediately upon activation of the recovery plan; and
6.2.3
The Central Bank must be notified within 2 business days of the breach of the recovery plan indicator or immediately upon activation of the recovery plan.
For the purpose of the above, activation of the recovery plan means that the breach of the recovery plan trigger was confirmed and that the implementation of recovery options must be considered.
6.3
The recovery indicator framework must be integrated into the Financial Institution’s risk management and management information system. Financial Institutions must calibrate their recovery triggers to enable the timely implementation of recovery options and reduce the risk that its risk tolerance will be breached. The recovery plan must contain the expected implementation timeframes of the recovery options.
6.4
The recovery plan must include a range of quantitative and qualitative recovery indicators.
6.5
Quantitative indicators shall at a minimum include capital indicators, liquidity indicators, profitability indicators, and asset quality indicators. Quantitative recovery indicators are specified in the corresponding Annex to this Regulation.
6.6
Qualitative recovery indicators could include, for example, difficulties in issuing liabilities at current market rates, unexpected loss of Senior Management, adverse court rulings, negative market press and significant reputational damage to the franchise.
6.7
The choice of recovery indicators and the calibration of their corresponding triggers must be justified in the recovery plan. Capital and liquidity recovery indicators must be calibrated in respect of the Financial Institution’s corresponding buffers.
6.8
The recovery plan must include a detailed description of the governance arrangements surrounding the monitoring of the recovery indicators and the associated escalation procedures when they are triggered.