The guidelines outline the preparation of recovery plans for thrift, rural, and cooperative banks, emphasizing the importance of governance, early warning indicators, and recovery strategies. These plans are required to be submitted to the Bangko Sentral ng Pilipinas by June 30, 2024. The document details essential components such as governance arrangements, critical functions, and stress scenarios that banks must consider. It serves as a comprehensive framework for banks to enhance their resilience during financial stress, ensuring they can restore capital and liquidity effectively.

Key Points

  • Outlines recovery plan requirements for thrift, rural, and cooperative banks
  • Emphasizes governance arrangements and early warning indicators
  • Details recovery strategies and critical functions for banks
  • Sets submission deadline for recovery plans to June 30, 2024
Rabel B
11 pages
Language:English
Type:Guide
Accounting
Rabel B
11 pages
Language:English
Type:Guide
Accounting
240
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Annex A
Page 1 of 11
OFFICE OF THE DEPUTY GOVERNOR I FINANCIAL SUPERVISION SECTOR
MEMORANDUM NO. _________
To : ALL THRIFT/RURAL/COOPERATIVE BANKS
Subject : Guidelines on the Preparation of Recovery Plan for Banks with
Simple and Non-Complex Operations
In its Resolution No. 1506 dated 13 October 2022, the Monetary Board approved
the amendments to the guidelines governing the submission of recovery plan of banks
as embodied under Circular No. 1158 dated 18 October 2022.
The amended guidelines expanded the scope of application of recovery planning
requirements to all banks, including thrift, rural, and cooperative banks. The first
recovery plan of said banks is required to be submitted to the appropriate supervising
department of the Bangko Sentral ng Pilipinas on or before 30 June 2024.
A suggested format of the recovery plan for banks with simple and non-complex
operations
1
is provided in Annex A, which outlines the essential principles, components,
and supervisory expectations for its preparation. Banks are expected to consider the
suggested format as a starting point, and customize it in accordance with the
institution’s size, nature of operations, and overall risk profile. It should be emphasized
that while the provided format covers the minimum requirements of Circular No. 1158,
banks are encouraged to elaborate on specific elements or provisions to enhance the
credibility of their recovery plan as the suggested format is general in nature.
Answers to frequently asked questions are also provided in Annex B to address
the various queries and clarifications related to Circular No. 1158 and guide relevant
stakeholders.
For guidance and compliance.
CHUCHI G. FONACIER
Deputy Governor
30 May 2024
1
Pertain to thrift, rural and cooperative banks which do not have the characteristics of “Complex
Banks” as provided under Section 131 of the Manual of Regulations for Banks on Policy Statement and
Definition of Terms.
Digitally signed by
Chuchi G. Fonacier
Date: 2024.05.30
13:32:38 +08'00'
M-2024-017
Annex A
RECOVERY PLAN
(Suggested Format)
This document shall be read in conjunction with Bangko Sentral ng Pilipinas (BSP)
Circular No. 1158 dated 18 October 2022 on the Guidelines on Recovery Plan of Banks.
I. Executive Summary
This section shall present a brief overview of the recovery plan which would
typically cover the following:
1. Purpose of the bank’s recovery plan;
2. Governance arrangements;
3. Summary of early warning indicators and triggers;
4. Key recovery strategies; and
5. Operational plan for the implementation of the recovery options.
In the subsequent submissions of recovery plan to BSP, the executive summary
should contain a description of any significant changes in the plan.
II. Underlying Principles/Guidelines
This section shall cover the relevant organizational structure, key principles and
terminologies, and overall operational considerations to develop, review,
maintain, and implement, as necessary, the recovery plan.
A. Governance Arrangements
This section shall contain the specific governance arrangements in the
preparation, maintenance, implementation, and activation of the recovery plan.
It shall clearly define the roles and responsibilities of the board of directors
(board), designated officers/employees, and self-assessment functions during
the different stages of recovery planning, to wit: (1) development, review and
approval of the recovery plan during normal business conditions; (2) monitoring
of internally-set triggers/indicators and reporting to board/management; and
(3) activation of the recovery plan, execution of recovery options and
communication plan during a crisis or stress situation.
The governance arrangements shall also specify the following:
1. Level of authority required to activate the recovery plan and implement each
type of recovery action;
2. Roles of the self-assessment functions and board-level audit committee in
the independent review or assessment of the recovery plan; and
3. The responsibilities of the designated officer/s who is/are the lead owner/s of
the recovery plan who should possess sufficient stature and authority
(e.g., President).
Duties and responsibilities of the board, President and designated officers in the
recovery planning process may include the following:
Board of Directors
▪ Put in place a robust governance structure, and ensure sufficient and capable
manpower to support the recovery planning process.
▪ Discuss and approve the recovery plan including updates thereto.
▪ Approve action plans and provide direction and oversight during the recovery
process.
Page 2 of 6
President
▪ Lead the recovery planning process and ensure that the recovery plan is
maintained and updated as needed.
▪ Notify the Board regarding the situation and of the proposed decision
whether to activate the recovery plan or not.
▪ Upon activation of the recovery plan, provide updates to the board and BSP
on the current situation as well as the plans/strategies, as frequently needed.
▪ Oversee and/or lead the execution of the communication plan as laid out in
Section J on Communication Strategy.
▪ Represent the bank in meetings and other external engagements, as
required.
Other designated officers/employees
▪ Monitor set triggers/ indicators.
▪ Report to the President any breach in triggers/indicators.
Internal Auditor
▪ Conduct an independent review of the recovery plan on a periodic basis.
In addition, this section explains how the recovery planning process is built into
the bank’s business-as-usual risk management activities. As outlined in the BSP
Circular No. 1158, the recovery plan shall complement existing capital, liquidity,
and business contingency plan as well as the other crisis-management plans
with a focus on recovering from extreme stress situations. Hence, the recovery
plan is intended to be more comprehensive and holistic, integrating capital,
liquidity, and operational aspects into a single plan.
Further, this section shall discuss the maintenance of a management information
system (MIS) that is adequate and capable of generating necessary information
on a timely and accurate basis to enable the board and management to
effectively discharge their respective responsibilities.
B. Critical Functions and Services
This section shall contain the information relating to critical functions and
services, and MIS, which is necessary in recovery planning.
Banks shall identify its critical functions and services. At a minimum, critical
functions shall include deposit-taking and lending. Critical services, on the other
hand, may include the following operational services:
1. Information technology covering the software applications (e.g., accounting,
loan, CASA systems), data storage, and disaster recovery strategies, including
description and mapping to the critical functions;
2. Regulatory reporting or the submission of required reports/documents to the
BSP and other regulatory agencies such as the Securities and Exchange
Commission, Bureau of Internal Revenue and Philippine Deposit Insurance
Corporation;
3. Customer records/database; and
4. Outsourced services.
Banks shall also provide the actions necessary to operate and maintain the
critical functions and services in a recovery scenario, such as arrangements that
would enable the continuous functioning of IT systems.
C. Early Warning Indicators and Triggers
This section shall discuss the set of triggers and early warning indicators (EWIs)
in relation to the bank’s risk profile and desired risk appetite, and the procedures
related to monitoring, escalation and approval process.
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End of Document
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FAQs

What are the key components of the recovery plan guidelines?
The recovery plan guidelines include essential components such as governance arrangements, critical functions, early warning indicators, and recovery strategies. Governance arrangements define the roles and responsibilities of the board and designated officers in the recovery planning process. Critical functions highlight the necessary operational services, while early warning indicators help banks monitor their financial health. Recovery strategies outline actionable steps banks can take to restore their capital and liquidity during stress scenarios.
What is the significance of early warning indicators in the recovery plan?
Early warning indicators are crucial for identifying potential financial distress within banks. These indicators, which may include capital adequacy ratios and liquidity ratios, allow banks to monitor their performance against set thresholds. By establishing these indicators, banks can proactively address issues before they escalate into crises. The guidelines encourage banks to customize their indicators based on their risk profiles and operational contexts, enhancing their overall risk management.
What is the deadline for submitting the recovery plans?
The Bangko Sentral ng Pilipinas mandates that the first recovery plans from thrift, rural, and cooperative banks must be submitted by June 30, 2024. This deadline is part of a broader effort to ensure that all banks have robust recovery strategies in place. Meeting this deadline is essential for compliance with regulatory expectations and for enhancing the resilience of the banking sector. Banks are encouraged to start preparing their plans well in advance to ensure thoroughness and accuracy.
How do the guidelines integrate with existing risk management frameworks?
The guidelines emphasize that recovery plans should complement existing capital, liquidity, and business contingency plans. This integration ensures a holistic approach to risk management, allowing banks to respond effectively to extreme stress situations. By aligning recovery plans with other risk management frameworks, banks can create a cohesive strategy that addresses both immediate and long-term financial stability. This comprehensive approach is vital for maintaining the overall health of the banking sector.
What types of recovery strategies are suggested for banks?
The guidelines suggest various recovery strategies, including strengthening capital positions, asset sales, mergers, and securing adequate liquidity. Each strategy must be practical and realistic, contributing materially to restoring the bank's financial health. The document emphasizes that recovery actions should not only focus on immediate financial restoration but also address underlying causes of distress, such as improving risk management systems. This multifaceted approach is designed to enhance the bank's resilience against future stress.

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