The European Banking Authority (EBA) today published a Report comparing how banks test the implementation of their recovery plans through so-called 'dry runs,' finding that approaches and levels of maturity vary significantly across institutions. While most institutions recognise the value of dry runs and use lessons learned to improve recovery planning, those carried out primarily to meet supervisory expectations tend to be less effective, resembling compliance exercises with limited insights and follow-up actions. In contrast, institutions with more advanced practices use dry runs as genuine management tools, fully embedding recovery planning within their broader risk management framework.
Document Details and Nature The Report, published on 13 April 2026, is a benchmarking exercise rather than prescriptive guidance. It stems from the EBA's supervisory convergence priorities for 2026, under which the usability and testing of recovery plans is a key focus for prudential supervisors. The analysis reflects the EBA's broader mandate to contribute to effective recovery and resolution planning.
Policy Orientations and Trade-offs The EBA highlights the importance for institutions to maintain regular, high-quality testing of key recovery plan elements and to continue refining their dry run practices. The Report also points to potential benefits of stronger synergies and better integration of testing activities across recovery and resolution, supporting a more effective crisis management continuum. This approach balances the need for operational preparedness against the risk of excessive compliance burden—where dry runs become box-ticking exercises rather than genuine risk management tools.
Impact on Stakeholders - EU banks and investment firms: Those with less mature practices face pressure to elevate dry runs from compliance exercises to strategic management tools, potentially requiring additional resources and cultural shifts. Conversely, advanced institutions may gain competitive advantage through enhanced crisis readiness. - National competent authorities: Supervisors gain benchmarks to assess the quality of recovery plan testing across institutions, enabling more targeted oversight. However, they may need to adjust supervisory expectations to encourage meaningful testing over mere compliance. - EU taxpayers and financial stability: More effective dry runs reduce the likelihood of bank failures requiring public bailouts, benefiting overall financial stability. However, the lack of prescriptive guidance means improvements depend on voluntary adoption by banks. - Resolution authorities: The Report's call for stronger integration of recovery and resolution testing aligns with the EBA's future mandate under the Crisis Management and Deposit Insurance (CMDI) regulatory framework to coordinate EU-wide simulation exercises, potentially improving cross-border crisis management.
Expected Institutional Follow-up The EBA notes that this benchmarking exercise aims to support institutions in further developing their dry run practices and to contribute to useful benchmarks for implementation. The Report is particularly timely given recent developments, including the publication of the EBA Handbook on Simulation Exercises for Resolution Authorities and the EBA's preparation for its future CMDI mandate to coordinate EU-wide simulation exercises. This follows the EBA's broader focus on supervisory convergence, as seen in its April 9 consultation on shadow banking exposure limits and its March 30 appointment of François-Louis Michaud as new Chair.
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