The EBA publishes Report on banks’ dry run testing of their recovery plans

The analysis highlights that, while most banks recognise the value of dry runs, approaches and levels of maturity vary significantly. The report identifies that dry runs are most effective where they are embedded within wider risk management and governance frameworks, rather than undertaken solely to meet supervisory expectations.

For banks, the findings provide useful insight into supervisory priorities for 2026 and highlight areas where recovery planning and testing arrangements may need to be further strengthened. Furthermore, the report does not introduce new regulatory returns or reporting templates, but it is likely to increase supervisory focus on how banks evidence the usability and operational effectiveness of their recovery planning arrangements.

EBA findings on dry run practices

The EBA report compares how banks test the implementation of their recovery plans through dry runs and assesses how effectively these exercises support crisis preparedness. For example, a bank may test how it would respond if its capital or liquidity position suddenly came under pressure. The report shows that most institutions see value in dry runs, but that approaches and levels of maturity still vary significantly across the sector.

In our view, a key distinction emerges between dry runs that are undertaken primarily to meet supervisory expectations and those that are embedded within wider governance and risk management frameworks. Where dry runs resemble compliance exercises, they often produce limited insights and weak follow‑up action. By contrast, more advanced practices use dry runs as management tools to improve the credibility and practical use of recovery plans. For example, a bank may use a dry run to test whether senior management can meet quickly, review recovery indicators and decide which actions should be considered in a stress event.

What effective dry runs look like in practice

The report highlights that meaningful dry runs go beyond testing documentation and focus on whether recovery plans can be executed under realistic stress conditions. This includes assessing decision‑making processes, governance arrangements and the operational feasibility of recovery options.

For example, an effective dry run may simulate a rapid deterioration in capital or liquidity and test how quickly senior management can convene, assess recovery indicators and decide which recovery options to activate. Less effective exercises, by contrast, may only confirm that policies and procedures exist, without testing whether they can be applied within required timeframes.

By identifying operational constraints and clarifying roles and responsibilities, well‑designed dry runs can materially improve firms’ ability to respond to stress events in a timely and credible manner.

Implications for banks and supervisory engagement

The EBA’s findings underline that supervisory expectations increasingly extend beyond the completeness of recovery plans to their usability and operational effectiveness. In the current environment of heightened uncertainty and increased supervisory focus in 2026, banks are expected to demonstrate that recovery planning is embedded within day‑to‑day governance and decision‑making processes.

Banks may therefore need to consider whether:

• Dry runs sufficiently test key recovery plan elements under realistic and severe scenarios
• Lessons learned are formally documented, escalated and acted upon
• Recovery plan testing is aligned with wider risk management and crisis management frameworks

For example, in our opinion, a bank may run a dry run to test whether responsibilities are clear across risk, finance and senior management, and whether issues identified during the exercise are properly recorded and followed up. This can help show whether recovery planning is embedded in governance processes rather than treated as a standalone exercise.

The findings reinforce supervisory expectations that banks can evidence the operational effectiveness of their recovery planning arrangements through ongoing supervisory dialogue and review activity.

How Forvis Mazars can help

Our prudential risk experts recognise that evolving supervisory expectations around recovery planning and testing remain a key driver of banks’ strategic and governance priorities. We support institutions in strengthening the usability and operational effectiveness of their recovery plans, including the design, execution and refinement of dry run exercises. We work closely with clients to identify gaps, embed lessons learned and enhance governance and decision‑making frameworks in line with supervisory expectations.