The EACB comments on the SRB Operational Guidance on Business Reorganisation Plan (BPR) Analysis Report. We stress that the primary objective of the BRP Analytical Report should be to assess banks’ operational and organisational capabilities.
However, the current guidance appears to conflate this objective with an expectation for detailed multi-year financial forecasting. Such an approach is neither operationally feasible in a resolution context nor particularly meaningful. For this reason, we have suggested amendments that would better align the exercise with its intended purpose and ensure a more proportionate and practical implementation.
For example, it could be improved the methodology for assessing the sustainability of a bank’s business model at the end of the five-year reorganisation horizon. Indeed, the qualification of fixed ranges Return on Equity (RoE) and Cost-Income Ratio (CIR) might be misleading when assessing an institution and could have unwanted consequences.
We therefore suggested removing these references, or at least clarifying more explicitly that the proposed ranges for assessing BRPs should be treated as indicative, thereby leaving the IRB with the flexibility to assess the effectiveness of BRPs on a case-by-case basis.