How to Structure a Recovery Plan Regulators Will Accept as Executable

Most Recovery Plans fail the credibility test for the same reason: they read as documents written to be filed, not executed. Supervisors can tell within an hour whether a plan reflects genuine management conviction or whether it is a stitched-together compendium of theoretical options nobody has pressure-tested. The difference shows up in the specificity of triggers, the realism of option quantification, and whether the governance choreography would actually work at 2am on a Sunday.

Key Executive Takeaways

• A credible Recovery Plan is judged on executability under stress, not comprehensiveness on paper: every option must have a named owner, a realistic timeline, and evidence it has been tested.
• Trigger frameworks fail most often because they are calibrated to breach only when recovery is already impossible; indicators must fire early enough to preserve genuine optionality.
• The board must demonstrably own the plan, which means directors should be able to describe the escalation path, the menu of options, and the trade-offs between them without reading from the document.

Start with the stress, not the options

The common error is to catalogue recovery options first and then reverse-engineer scenarios that make them look sufficient. Supervisors read this immediately. Begin instead with scenarios that genuinely threaten the firm: idiosyncratic (large operational loss, reputational event, counterparty failure), market-wide (funding freeze, sovereign stress), and a combined scenario. Calibrate severity so that the firm is pushed close to non-viability without passing it. If every scenario is survivable with modest action, the plan is not stressed enough.

For each scenario, map the time path. A liquidity shock plays out over days; a capital erosion scenario over quarters. Options must match the clock.

Build options that have been tested, not imagined

Each recovery option needs four things: a quantified impact (capital, liquidity, or both), a realistic execution timeline, identified dependencies, and evidence of feasibility. Asset sales assumed to clear at book value in a stressed market will be challenged. Dividend cancellation and variable remuneration suspension are credible because they are within management control. Business line disposals require evidence of market appetite, legal separability, and operational carve-out readiness.

What good looks like: a disposal option supported by prior strategic review work, indicative buyer interest documented, and a data room assessment of readiness. What fails: a line item claiming £400m of capital relief from a disposal nobody has modelled operationally.

Calibrate triggers to preserve optionality

Indicators should be set so that escalation begins while management still has choices. If your capital trigger fires at 50 basis points above the regulatory minimum, you have no runway. Build a layered framework: early warning indicators that prompt heightened monitoring, recovery indicators that convene the recovery committee, and escalation points that mandate specific option execution. Each threshold needs a documented rationale.

Most plans get caught here because the triggers were set by finance in isolation. Risk, treasury, and the business must own them jointly.

Make the governance real

The plan must specify who convenes the recovery committee, within what hours, with what quorum, and with what delegated authority. Board involvement needs to be realistic: a full board meeting within four hours on a weekend is unlikely. Define what the Chair and designated NEDs can authorise in the interim.

Run a live simulation at least annually. Supervisors increasingly ask for evidence of this. The output of the simulation, including what went wrong, should be reflected in the next version of the plan.

Address the integration points

The Recovery Plan sits alongside the ICAAP, ILAAP, resolution pack, and operational resilience framework. Inconsistencies between them are a reliable way to lose credibility. If your ILAAP assumes committed facilities remain available in stress and your Recovery Plan assumes they are withdrawn, expect questions. Reconcile the assumptions explicitly.

What to do before submission

Stress-test the plan against a scenario the authoring team did not design. Have a senior figure outside the recovery workstream, ideally a NED with relevant experience, challenge the option quantification line by line. Confirm the board can speak to it unprompted. Then submit.

If you cannot pass that internal test, delay submission and fix the plan. A weak plan that invites a Section 166 or a formal direction is far costlier than a thorough iteration cycle.

Frequently Asked Questions

How many recovery options should the plan contain?

Enough to cover the scenarios with meaningful redundancy, typically eight to fifteen for a mid-sized firm. Quality matters more than count. Three well-evidenced options beat ten theoretical ones.

Should we include options we would be reluctant to execute?

Yes, if they are genuinely available. The plan should reflect the full menu, with the trade-offs explicit. Omitting painful options because the board dislikes them undermines credibility.

How often should the plan be refreshed?

Annually at minimum, and whenever there is a material change in business model, risk profile, or group structure. The simulation output should feed the next refresh.

What is the single most common supervisory criticism?

Options that are not genuinely executable in the timeframe claimed, particularly disposals and capital raises assumed to complete in weeks under stressed market conditions.