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Recovery Planning: A New Valuable Corporate Governance Framework for Credit Institutions

Since the outset of the 2008 financial crisis, policymakers realized the need to implement a new regime for banks and financial institutions restructuring. As a result, a change of attitude in the legal construction of the banking crisis management seems to have taken place. Amid the newly established tools thought to deal with the insolvencies of banks, ex‐ante regulatory instruments aimed at preventing banks from defaults by stabilizing their financial sustainability play a prominent role. This holds true especially with regard to "recovery planning" which sets out a range of recovery actions and strategies able to restore the ongoing business of credit institutions at early stage in the events of financial distress. This paper argues that recovery planning may be deemed as a valuable corporate governance instrument for credit institutions. Recovery plans are indeed capable to positively affect the risk management organization of the firm and provide additional incentives to scrutinize excessive risk‐taking behaviors, thereby leading to the establishment of more efficient governance practices and an higher degree of protection for bank’s stakeholders.