Purpose of the plan
A business reorganisation plan is required whenever the bail-in tool has been used to recapitalise an institution and keep it operating as a going concern. Recapitalising a failed bank restores its regulatory capital, but it does not by itself fix the underlying problems that caused the failure. The reorganisation plan is the instrument through which those root causes are addressed, setting out the measures needed to restore the entity's long-term viability within a reasonable timeframe.
The plan must diagnose the factors that led to the bank becoming failing or likely to fail, describe the actions to be taken to address them, and establish a timetable for implementation. Typical measures include restructuring or divesting business lines, reducing costs, disposing of assets, and reorganising operations. The plan must be realistic and based on prudent assumptions about the economic and market conditions in which the bank will operate.
How it fits the resolution timeline
The reorganisation plan follows the resolution action rather than preceding it. After bail-in has been applied, the management body or person appointed to run the institution draws up the plan and submits it to the resolution authority, which assesses whether implementation can reasonably be expected to restore viability. If the authority is not satisfied, it can require amendments. Once approved, the institution implements the plan and reports on progress, so the plan governs the post-resolution restructuring phase.
It should be distinguished from the recovery plan, which a bank prepares in advance while healthy to set out how it would respond to stress, and from the resolution plan, which the authority prepares in advance to describe how the bank would be resolved. The reorganisation plan is a post-resolution document produced only after the bail-in tool has actually been used.
Legal basis
The requirement for a business reorganisation plan is set out in Article 52 of the BRRD, which provides that where the bail-in tool is applied to recapitalise an institution, a plan must be drawn up and submitted to the resolution authority, specifies its minimum content, including the diagnosis of the causes of failure and the measures to restore viability, and governs its assessment, approval and implementation. Within the banking union the same obligation applies through the SRMR resolution framework.
Practical relevance for banks and investors
For banks, the plan is the bridge between surviving the point of failure and returning to a sustainable footing. Its content, cost-cutting, disposals, business-line exits, determines the shape of the institution that emerges from resolution, so the credibility of the plan is central to whether a recapitalisation actually succeeds.
For investors, the plan matters because it drives the value of the recapitalised entity in which bailed-in creditors may now hold equity. Creditors whose claims were converted into shares have an interest in a credible, well-executed reorganisation, since the eventual value of their new stake depends on the bank being restored to viability rather than merely being solvent on paper.