Regulators require all systemically important financial institutions to submit detailed Recovery and Resolution Plans (RRP), commonly known as Living Wills.
The Integrated RRP Lifecycle Pipeline
[Bank Monitors Internal Indicators] ---> [Trigger Crossed: Activate Plan] ---> [Deploy Recovery Tools]
                                                                                       |
                                                                                       v
[Resolution Authority Intervenes] <--- [Fails to Restore Capital Levels] <-------------+

Living wills contain two primary modules:
  • The Recovery Plan: Authored by the bank itself, this playbook outlines specific actions management can take to restore financial stability (such as selling non-core business lines or raising private capital) if its internal capital or liquidity indicators cross critical thresholds.
  • The Resolution Plan: Authored by the resolution authority, this guide details the exact steps regulators will take to wind down the institution safely if management’s recovery efforts fail, protecting the wider financial system from a chaotic collapse.

 
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