How to Design a Board-Approved Recovery Plan That Meets PRA Resolvability Expectations

A recovery plan is not a compliance artefact. It is the document that proves your board and executive have thought seriously about how the firm would stay alive under severe stress, and how it would fail safely if recovery did not work. The PRA reads recovery plans as evidence of governance quality. Weak plans signal weak boards.

Key Executive Takeaways

• A credible recovery plan is anchored in specific, quantified stress scenarios with clearly owned management actions, not generic optionality menus.
• Board approval means substantive challenge and ownership of trigger points, not sign-off on a document drafted entirely by the second line.
• Resolvability expectations require you to demonstrate operational readiness through testing, playbooks, and evidence, not assertions of capability.

Start With the Scenarios, Not the Template

Most weak plans begin with the regulatory template and populate it. Strong plans begin with three or four genuinely severe, firm-specific scenarios: a fast idiosyncratic liquidity run, a slow-burn capital erosion tied to your actual concentrations, a market-wide event compounded by an operational failure. The scenarios should hurt. If your reverse stress test does not identify a plausible path to non-viability, supervisors will assume you have not looked hard enough.

Quantify the impact on capital, liquidity, MREL, and operational continuity across a defined timeline. Vague narrative descriptions of stress are the single most common drafting failure.

Build Recovery Options With Real Optionality

List only actions the firm could actually execute, and be honest about conditions. For each option, specify: the capital or liquidity benefit, the execution timeline, the counterparties or approvals required, the reputational cost, and the scenarios in which it becomes unavailable. An asset sale that looks attractive in isolation may be worthless in a market-wide stress. A capital raise assumes access that a distressed firm rarely has.

Good plans show which options remain viable when others fail. Weak plans present a long menu without acknowledging correlation between availability constraints.

Set Triggers That Actually Trigger

Early warning indicators and recovery triggers should be calibrated to move before the firm is in crisis, not after. Test them against historical data and your stress scenarios. If your triggers would only have fired after a real event became public, they are set too late.

Specify the governance response at each level: who is notified, who convenes, what decisions are on the table, and the maximum time to decision. A trigger that leads only to a review meeting is not a trigger.

Address Resolvability Expectations Directly

The Resolvability Assessment Framework requires you to demonstrate three outcomes: adequate financial resources, continuity through resolution, and coordination and communication. Your recovery plan should show the interfaces with resolution planning, not treat them as separate exercises. Cover: valuation capability under time pressure, operational continuity arrangements for critical services, funding in resolution, restructuring feasibility, and management, governance and communication readiness.

Where your firm has identified capability gaps in its self-assessment, the recovery plan should acknowledge them and reference the remediation programme. Supervisors respect honest gap disclosure. They penalise firms that appear to have overlooked known weaknesses.

Get the Board Genuinely Involved

Board approval that consists of a single presentation and a resolution is not credible ownership. Expect the PRA to test whether directors understand the triggers, the trade-offs between options, and the point at which they would escalate to the regulator. Run a board simulation on one of the scenarios before final approval. The questions directors ask in that session will improve the plan more than any second-line review.

Document the board's challenge. Minutes that show substantive debate on triggers, option selection, and communication strategy carry weight in supervisory dialogue.

Test It, Then Test It Differently

A plan that has never been rehearsed is a plan you cannot rely on. Run playbook exercises on communication cascades, data production for the PRA under stress, and the mechanics of executing at least one recovery option. Capture what broke and fix it before the next annual cycle.

The Next Decision

Before your next submission, ask one question: if the PRA called tomorrow and asked your Chair to walk through the plan unaided, would they be convincing? If the answer is uncertain, the work to do is with the board, not the drafting team.

Frequently Asked Questions

How often should the plan be refreshed beyond the annual cycle?

Whenever there is a material change in business model, risk profile, group structure, or the external environment. A merger, a new critical outsourcing arrangement, or a significant shift in funding mix should each trigger a review, not wait for the calendar.

How detailed should recovery option quantification be?

Detailed enough that an independent reader can reconstruct the benefit calculation and challenge the assumptions. Benefits stated as ranges without underlying workings will be treated as unevidenced.

What is the right relationship between recovery and resolution planning?

They are distinct but must be internally consistent. Your recovery options should not assume resources that resolution planning treats as encumbered, and your governance triggers should include the point at which resolution authorities are engaged.

Who should own the plan internally?

Accountability sits with a named SMF, typically the CFO or CRO depending on firm structure. Drafting can be delegated; ownership cannot. The accountable executive should be able to defend every material judgement in the document.

What do supervisors most often criticise?

Generic scenarios, optimistic execution assumptions, triggers set too late, and evidence of limited board engagement. Fixing these four issues addresses most of the feedback firms receive.