DNB applies proportionality to recovery plans of small and medium-sized banks

Each year, DNB conducts an eligibility assessment to determine whether LSIs qualify for simplified recovery plan obligations. In doing so, we consider both quantitative and qualitative criteria, in line with Commission Delegated Regulation 2019/348. For the quantitative criteria, we calculate a score expressed in basis points for each bank. DNB has decided to set the threshold at 105 basis points, meaning that banks with a score above this threshold are not eligible for simplified obligations. We then apply qualitative criteria to banks with scores below the threshold. This means that banks which the ECB qualifies as high-impact and banks that will be taken into resolution in case of failure are not eligible for simplified obligations. The remaining banks qualify for simplified obligations and will be informed about this each year.

Simplified obligations relate to both a recovery plan’s content and submission frequency. Banks will be informed on the specific parts of a recovery plan that they may submit in simplified form. Also, the plan’s submission frequency is the same as that of our SREP decisions. A bank must submit its recovery plan to us by 31 December of the year in which it received the SREP decision.

DNB assesses the recovery plan within six months. In case the plan is of insufficient quality, the bank must improve and resubmit it within two months, in accordance with Section 23g(3) of the Decree on Prudential Rules for Financial Undertakings (Besluit prudentiële regels Wft).

Disclaimer 

This DNB policy statement differs from our regular policy statements as described in the Explanatory guide to DNB's policy statements. This is because we wish to retain flexibility so that we can from time to time bring the exact degree of proportionality we apply in line with new rules and practices, as allowed under Commission Delegated Regulation 2019/348. DNB therefore decides each year, for every bank individually, whether it is eligible for simplified obligations and exactly what these will entail. This policy statement is intended to provide additional transparency on our approach.