This document defines the general requirements for the development, updating, and submission of financial recovery plans to the National Bank for both commercial banks and those operating according to Islamic principles.
According to the new rules, the financial recovery plan must include measures aimed at maintaining the adequacy of capital, liquidity, and financial stability of the bank in the event of a significant deterioration in its condition. It is necessary to consider the scale and complexity of the bank's operations, as well as its risk profile.
Systemically important banks are required to submit their plans at least once a year, while other banks must do so every two years.
Additionally, plans must be updated in case of significant changes in the bank's financial, legal, or business status, as well as in its organizational structure. The National Bank may require more frequent updates or submissions of plans.
Critical changes that require updating include: losses exceeding 10% of equity, reorganization (merger or acquisition), large investments (over 10% of capital), changes in the structure of the banking group, events in risk management and internal control, as well as other factors affecting the risk profile, including changes in regulation and force majeure circumstances.
Contents of the Plan
The minimum contents of the plan include:
- a brief overview of key elements and changes since the last version;
- plan management (responsibility, approval procedures, and crisis management);
- strategic analysis (business model, critical functions, and connections);
- recovery indicators (capital, liquidity, profitability, and asset quality);
- recovery options and an assessment of their feasibility;
- recovery scenarios considering stress scenarios;
- communication plan during implementation.
For systemically important banks, it is additionally required to include market and macroeconomic indicators. It is also necessary to establish a timeframe within which the board of directors must decide to initiate the plan in case of indicator breaches and to inform the National Bank in such cases.
Mandatory Measures
According to the Regulation, banks must consider at least the following options: increasing equity capital (with an analysis of the capabilities of significant shareholders), reducing lending, limiting dividends, and decreasing debt burden and expenses. Additional measures, such as asset sales and attracting other forms of capital, are also permitted.
Scenarios
Systemically important banks must develop at least three scenarios (systemic, individual, and combined), while other banks may use two (systemic and individual). Scenarios must be "extraordinary but plausible" and should anticipate breaches of one or more indicators.
Submission Procedure and Assessment by the National Bank
The plan must be reviewed and approved by the board of directors before submission to the National Bank and must undergo an internal audit beforehand. Systemically important banks submit their plans annually by March 15, while others do so by March 15 of the current year according to the established frequency, as well as within 10 working days after significant changes. The National Bank reviews the plans within two months, and if there are deficiencies, banks are required to provide an updated version within two months after notification.
Action Plan for Recovery
Specific requirements pertain to the action plan for financial recovery for each type of risk/scenario, including specific actions, timelines, responsible parties, performance indicators, and expected outcomes, such as forecasts for economic standards and capital dynamics. The document also outlines requirements for documentation and signing, and if necessary, for engaging an auditing organization.
Changes to Existing Legislation and Entry into Force
This resolution also introduces changes to the document on measures of influence applied to banks (Resolution No. 2017-P-12/25-4-(NPA) dated June 15, 2017), stipulating that the financial recovery plan must be prepared in accordance with the new requirements, and Appendix 2 is rendered void.
The resolution comes into force 15 working days after its official publication.
