What the concept covers

Core business lines are the parts of a bank's business that materially drive its revenues, profits or franchise value. Where critical functions are defined by their importance to the outside economy, core business lines are defined by their importance to the institution itself: they are the activities without which the firm would lose a substantial part of its value or ability to operate as a going concern.

Examples might include a retail banking franchise, a corporate lending division, an asset-management arm or a flagship markets business. A single business line can host one or more critical functions, but it can also be commercially core while performing no function that is critical to the system, or perform a critical function while being commercially peripheral.

Why it matters in resolution and recovery planning

The concept appears in both recovery and resolution planning. In recovery planning, management identifies core business lines to understand which activities it would seek to preserve or divest under stress. In resolution planning, the authority maps critical functions onto core business lines and onto legal entities, so that the resolution strategy can be designed to keep essential activities running while non-core parts are restructured, sold or wound down.

This mapping is a core input to the resolution plan and to the resolvability assessment. It determines which legal entities need to be stabilised, where shared services and operational dependencies sit, and how a bail-in or transfer strategy would be sequenced across the group. Gaps or inaccuracies in the mapping can themselves constitute impediments to resolvability.

The BRRD defines core business lines in Article 2(1)(36) as business lines and associated services which represent material sources of revenue, profit or franchise value for an institution or for a group of which it is a part. Commission Delegated Regulation (EU) 2016/778 sets out, in Article 7, how core business lines are identified and how they are related to critical functions, including the criteria authorities apply when assessing materiality. The identification obligation is reflected in the content requirements for both recovery plans (BRRD Articles 5-9) and resolution plans (BRRD Articles 10-14).

Practical relevance for banks and investors

For banks, correctly identifying core business lines shapes the entire planning exercise: it defines which entities and services must be protected in resolution, which staff and IT systems are load-bearing, and where the firm should hold loss-absorbing and recapitalisation capacity. It also informs internal MREL allocation across the group, since capacity tends to be placed where the value and the critical functions reside.

For investors and analysts, the distinction between core business lines and critical functions clarifies how a group would be treated at failure. A business line that is commercially core but not systemically critical may still be sold or wound down in resolution if doing so serves the resolution objectives, whereas entities hosting critical functions are more likely to be recapitalised and kept open. Reading an issuer's disclosures on its business lines, alongside its group structure, helps investors judge where value and loss-absorbing capacity are concentrated.