On 25 April 2019, BaFin, in agreement with the Deutsche Bundesbank, submitted the Mindestanforderungen an Sanierungspläne für Institute und Wertpapierfirmen (MaSanV) for consultation.
The MaSanV-E will replace the MaSan after its entry into force. In addition, it will transpose into German law the EBA guidelines on the range of scenarios to be used in recovery plans (EBA/GL/2014/06) and the EBA Guidelines on the minimum list of qualitative and quantitative recovery plan indicators (EBA/GL/2015/02), and will concretise the provisions of the Delegate Regulation (EU) No. 2016/1075.
This creates the necessary requirements for the reorganisation planning of less significant institutions (LSI) as well as of institutions, which belong to an institution protection system (IPS).
As a result, the MaSanV will become the central legal norm, especially for smaller banks, alongside the German Sanierungs- und Abwicklungsgesetz (SAG).
Significant changes to the previous version
In the following, the main changes resulting from the draft bill, which is open for consultation until 24 May, in comparison to the last draft of a MaSanV from 2017, are presented:
- The principle of proportionality must be taken into account for recovery plans with simplified requirements.
- The thresholds for capital and liquidity requirements must be set in such a way that an appropriate distance is maintained from the legal binding requirement pursuant to CRR and KWG, including additional supervisory requirements pursuant to the SSM framework, e.g. as a result of the SREP process.
- Both in the case of simplified requirements and for an IPS, an application for an extension of the deadline for the first preparation of the restructuring plan is now possible. Moreover, in both cases it will no longer be required to update the recovery plan at every two years. Accordingly, the restructuring plan must only be updated and submitted to BaFin and the Deutsche Bundesbank after a change in the legal or organisational structure of the institution. This might be necessary due to a change in its business activities or its financial position, or after any change in the general risk situation that could have a material impact on the institution’s recovery plan, or which makes it necessary to change it for other reasons.
- If a group of institutions submits a request for exemption (request for inclusion in the recovery plan of an IPS), the consent of the institution superior to the group is sufficient.
- The period for notification of the decision by the supervisory authority on the request for exemption shall be adjusted from two months on from the date of a letter from the supervisor (notifying in writing receipt of the complete request for exemption) to three months from the actual date of receipt of the complete request for exemption.
- The term core business of the institution is defined in German law as the main business activities pursuant to the SAG. These are business areas and associated services that can have a significant impact on the net assets, financial position and results of operations of an institution or a group of institutions. This also includes business activities which, in the opinion of the institution or the group, could lead to a substantial loss of income or profits, to substantial losses or to a substantial loss of the investment value in the event of a disruption.
- When assessing the restructuring capacity, a differentiation between capital restructuring capacity and liquidity restructuring capacity is generally regarded as important. In addition, the remediation capacity should be calculated in concrete terms.
How can the changes be interpreted?
With the MaSanV draft, the BaFin as the regulatory authority has refrained from a gold plating of the European requirements. Instead, there are some administrative simplifications.
The emphasis on proportionality is consistently represented by the German side in the supervisory discussion at European level; it is no surprise to find it also in the MaSanV. Proportionality also ensures that small and specialised institutions can achieve the regulatory objectives pursued with the recovery plan without disproportionate expense. This results in efficiency potentials in the recovery plans depending on the individual case.
Institutions with simplified requirements and IPS will be given more time to prepare remediation plans or request extensions. In addition, they will only have to carry out a number of updates on a case-by-case basis and no longer within a fixed period of time.
The concrete calculation of the restructuring capacities for capital and liquidity should be covered by further development of the methods used for the stress scenarios. There is a particular need for action here for banks that have carried out a qualitative description in the past.
What should the institutions do?
Especially for banking institutions with reduced requirements, but also for all others, it is possible to rethink one’s own restructuring planning and focus on the principle of proportionality. At the same time, however, they should absolutely avoid cuts that make it more difficult for BaFin to get an idea of the overall economic situation and the ability to restructure. Otherwise, there is a risk of time-consuming feedback loops as the supervisory authority has to fulfil prudently its task of assessing the recoverability of the banks.
In the past, BaFin has made statements in various occasions regarding the requirements it places on restructuring planning. Institutions should use these statements as well as benchmarking with suitable market participants for their own restructuring planning in order to identify and leverage efficiency potentials.
 Minimum Requirements for the Contents of Recovery Plans
In case of any questions, please contact our experts at PwC.