Chapter 3: Recovery Plan and Resolution Plan
Recovery Plan
Article 6
1. The financial institution shall, within 180 days from the date of the request of the competent authority, prepare a recovery plan of the steps and procedures to be taken towards recovering its financial position upon exposure to fundamental changes with a negative impact.
2. If the financial institution is a holding company, it shall prepare a recovery plan for the financial group and a recovery plan for each subsidiary financial institution.
3. The recovery plan must include:
a) a summary of its key components and an indication of the financial institution’s ability to recover;
b) a summary of the fundamental changes in the financial institution since the last recovery plan submitted to the competent authority;
c) an outreach and disclosure plan to address any anticipated negative reaction from the markets as a result of the impact of the fundamental changes on the financial institution;
d) steps to recover capital and liquidity requirements, preserve the financial institution, and regain its financial position;
e) an estimation of the timeframe required to implement the primary components of the plan;
f) a detailed description of potential risks which may hinder implementation;
g) identification of the critical activities provided by the financial institution;
h) a detailed description of procedures for determining the market value of each activity in the financial institution as well as its operations and assets, and their potential to be marketed and sold;
i) arrangements and procedures to obtain liquidity, including identification of potential sources for liquidity and evaluation of the guarantees available for acquiring such liquidity;
j) arrangements and procedures for rescheduling and restructuring debts or for restructuring the institution activities and reducing any potential risks;
k) arrangements and procedures required to ensure the continued operation of settlement systems;
l) arrangements necessary for the sale of certain assets or activities of the financial institution in order to recover its financial position within an appropriate time; and
m) governance procedures of the plan, including identification of persons in charge of its preparation and implementation.
4. The competent authority may require the financial institution to include in its recovery plan quantitative and qualitative indicators reflecting the position of the financial institution, as well as the actions the institution may take with regards to each indicator in order to recover its financial position.
5. The competent authority may include in the Implementing Regulations additional rules and provisions governing the preparation and implementation of the plan.
Article 7
1. The financial institution shall, upon management approval, submit the recovery plan or any update thereto to the competent authority for approval.
2. The competent authority shall, within 90 days from receipt of the recovery plan, approve the plan or return it to the financial institution for amendment and resubmission within a specified period.
3. The financial institution shall update the recovery plan at the request of the competent authority within a period specified thereby.
4. The competent authority shall, upon requesting a recovery plan, take into account the importance of the financial institution, its size, interconnectedness and the complexity of its relations with local and foreign financial institutions, its modus operandi, and associated risks.
Resolution Plan
Article 8
1. The competent authority shall devise a resolution plan for each SIFI, which includes the resolution procedures to be taken upon the existence of the conditions referred to in Article 10 of this Law.
2. If the financial institution is a holding company, the competent authority shall devise a resolution plan for the financial group, and a resolution plan for each subsidiary financial institution.
3. In preparing the resolution plan, the competent authority shall identify significant obstacles which may hinder resolution procedures, and shall propose contingency plans.
4. In preparing the resolution plan, the competent authority shall take into account all potential crises and causes thereof, whether related to the SIFI or having an impact thereon.
5. The resolution plan must include the following:
a) Identification of the main competent authority, where necessary, and any relevant entity the cooperation of which is required in addition to the identification of its tasks and powers.
b) A summary of the main components of the plan.
c) A summary of fundamental changes in the SIFI which took place after the drafting of the last resolution plan.
d) Clarification of the method of separating critical activities or any other major activities from other activities legally and economically to ensure the continuity of the SIFI operation.
e) An estimated timeframe for the implementation of each key component of the plan.
f) A detailed description of procedures for determining the market value of each SIFI activity, operations, and assets, as well as the feasibility thereof to be marketed and sold.
g) Description of how the resolution procedures are funded.
h) Description of alternative resolution procedures which may be implemented depending on the status and circumstances of the SIFI.
i) Description of the options available for the continuity of the SIFI as a member of the settlement systems, and an assessment of options for transferring client assets, deposits, funds, accounts, and insurance policies.
j) Analysis of the impact of the resolution plan on SIFI personnel, its cost, and available settlement options.
6. The competent authority shall share with the SIFI its vision of the main components of the resolution plan or its update in order to receive feedback from the SIFI within a specified period, provided that it is not less than 60 days.
7. The competent authority shall update the resolution plan as necessary.
8. The competent authority may include in the Implementing Regulations additional rules and provisions on the preparation and implementation of the resolution plan.
Article 9
1. The competent authority shall submit the resolution plan and any update thereto along with the SIFI’s opinion, following its review in light of the SIFI’s feedback, to the Council of Economic and Development Affairs for approval.
2. The Council of Economic and Development Affairs shall, within 60 days from receipt of the resolution plan or its update, decide to either approve the plan or return it with comments to the competent authority for resubmission within a period set by the Council.