Purpose
Resolvability testing moves resolution planning from documentation to demonstration. Having a resolution plan and a set of capabilities on paper is not the same as being able to execute them at speed under stress. Testing exercises those capabilities in advance — running dry-runs, simulations, walk-throughs and targeted deep-dives — to confirm that governance can convene, that the required data can be produced within the necessary timeframe, that valuations can be supported, and that the bail-in or transfer mechanics would function. It is the assurance layer on top of the resolvability assessment.
How it works
Under the Single Resolution Board's approach, banks that have built the capabilities set out in the Expectations for Banks are progressively asked to test them. Testing can focus on a single capability, such as the ability to deliver a bail-in playbook, a management information system for valuation, or a liquidity-in-resolution estimate, or it can take the form of a broader multi-capability exercise. Findings feed back into the resolvability assessment: where a test reveals that a capability does not perform as intended, the shortcoming can be recorded as a deficiency or, if material, an impediment to resolvability that the bank must remedy. Over time, testing programmes have grown more demanding, moving from self-assessment towards authority-led exercises.
Legal basis
There is no article dedicated specifically to resolvability testing. The underlying legal anchor is the resolvability assessment in Article 16 of the Bank Recovery and Resolution Directive (2014/59/EU), read with the wider resolvability and impediment-removal framework in Articles 15 to 17. The concrete testing programmes are supervisory and operational in nature: they are elaborated in the SRB's Expectations for Banks and related guidance rather than in legislation, and they operationalise the directive's requirement that a bank actually be resolvable, not merely planned for.
Practical relevance
For banks, testing is where resolvability work is validated and where residual gaps become visible and actionable; a capability that fails a dry-run is a clear signal for remediation. For investors and analysts, a bank that has tested its resolution capabilities offers greater confidence that a resolution strategy could be executed without disorderly disruption. Because testing programmes are guidance-driven and still evolving, their scope and intensity differ across banks and across resolution authorities.