Recovery Plan

A recovery plan outlines measures a financial institution would take to restore viability under severe stress.

Meaning in Practice

The plan includes capital raising options, asset sales, cost reductions, and liquidity measures. It is activated before resolution procedures become necessary.

Why It Matters

Recovery planning strengthens institutional resilience and reduces the probability of failure. It provides supervisors with transparency on contingency measures.

Market Impact

Well-designed recovery plans can reduce market panic during stress events. Weak contingency planning may amplify uncertainty and volatility.

Example

A bank facing significant losses activates its recovery plan by suspending dividends and selling non-core assets.

Related Terms

Resolution Planning