EBA publishes technical standards and guidelines on resolution planning
19 December 2014
The EBA published today final draft Regulatory Technical Standards (RTS) on resolution planning and final Guidelines on measures to reduce or remove impediments to resolvability. These are part of the EBA's work to promote a consistent and coherent approach to bank resolution across the European Union (EU) and specify contents of resolution plans for EU institutions, as well as the criteria for the resolvability assessment. Common EU standards in these areas are essential to facilitate effective cooperation and joint decisions between resolution authorities.
The EBA technical standards on resolution planning and resolvability assessment identify eight categories of information that should be included in a resolution plan and set out both general and specific requirements to be included in each category to ensure the preferred resolution strategy is achieved. The RTS also detail the criteria for resolution authorities to assess resolvability and address any impediments to resolution, which may be related to the structure and operations of the bank, to the availability of financial resources, or to legal, cross-border or other issues. Resolution authorities should assess this both on the basis of a preferred resolution strategy and any variant strategies needed to address different scenarios.
The RTS requires resolution authorities to consider whether and how some liabilities are less likely to be subject to bail-in (or to share the burden of loss absorption and recapitalisation if another resolution tool is used). This is an important input into setting the minimum requirement for own funds and eligible liabilities (MREL), as described in the EBA's consultation paper on the criteria for setting MREL (https://www.eba.europa.eu/-/eba-consults-on-criteria-for-determining-the-minimum-requirement-for-own-funds-and-eligible-liabilities-mrel-).
The RTS also recognise the need for proportionality, which is addressed through a staged assessment process, inherently less complex resolution plans for less complex institutions, and the possibility for Member States to apply simplified obligations to certain institutions. The EBA is currently consulting on Guidelines on the criteria for applying such simplified obligations (LINK HERE) (https://www.eba.europa.eu/-/eba-consults-on-the-eligibility-of-institutions-for-simplified-obligations-for-recovery-and-resolution-planning).
The Guidelines issued along the RTS further specify the circumstances under which resolution authorities can require measures to overcome obstacles to resolvability that might have been identified in the assessment and also specify the measures that can be taken to reduce or remove these impediments.
The BRRD envisages a dialogue between authorities and the institution: As a first step the institution or group is required to propose possible measures to address the impediments identified by the resolution authorities. Only if the proposed measures do not effectively reduce or remove the impediments, the resolution authorities will require alternative measures in the following step. The Guidelines require such measures to be both proportionate and necessary, ensuring that particularly intrusive measures are only applied where necessarily required to remove substantive impediments to resolvability.
The Guidelines do not prescribe or privilege certain business models or organisational structures, but allow for a case-by-case analysis of the impediments caused by the institution or group and of the best way to address them. The appropriate measure depends on the organisation and the business model of the institution and on its environment, as analysed by the resolution authority in the resolvability assessment with a view to the preferred resolution strategy. Variant strategies should be considered if the measures based on these variant strategies are compatible with the preferred resolution strategy.
Franca Rosa Congiu
E-mail: email@example.com - Tel: +44 (0) 207 382 1772