Guidelines on measures to reduce or remove impediments to resolvability

Status: Final and translated into the EU official languages

These Guidelines complement the EBA technical standards on resolution planning and resolvability assessment by setting out the circumstances under which resolution authorities can impose measures to overcome obstacles to resolvability identified by the assessment.

EBA publishes technical standards and guidelines on resolution planning

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.
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772

EBA consults on resolution planning and on measures to address impediments to resolvability

EBA consults on resolution planning and on measures to address impediments to resolvability

09 July 2014

The EBA launched today two consultations on draft Regulatory Technical Standards (RTS) on resolution planning and on draft Guidelines on measures to reduce or remove impediments to resolvability. These RTS and Guidelines are part of the EBA's work to promote a consistent and coherent approach to bank resolution across the European Union. Both consultations run until 9 October 2014.

Bank resolution can be a complex process, and so robust and credible resolution strategies and plans are needed in advance. The proposed RTS specify the contents of resolution plans drawn up by resolution authorities for individual institutions and groups as well as the criteria on which the resolvability assessment should be based. Common European standards in these areas are essential to facilitate effective cooperation and joint decisions between resolution authorities.

The RTS identify eight categories of information which a resolution plan should contain, 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 on which resolution authorities should base their assessment of the resolvability of an institution or group.  For this assessment, the draft RTS propose a staged approach. First, resolution authorities should assess whether liquidation under normal insolvency procedures is feasible and credible. If this is not the case, they should identify a preferred resolution strategy, and then assess the feasibility and credibility of that strategy. The preferred resolution strategy may be identified either as a single-point-of-entry (SPE) – in which resolution powers are applied to the top of a group by a single national resolution authority - or "multiple point of entry" (MPE) - in which resolution tools are applied to different parts of the group by two or more resolution authorities acting in a coordinated way. The draft RTS propose criteria to enable the choice between these two options.

The draft RTS recognise the need for proportionality, which is addressed through the staged assessment process, through the inherently less complex resolution plans needed for less complex institutions, and through the possibility for Member States to apply simplified obligations to certain institutions. Forthcoming EBA Guidelines will expand on the criteria laid down in the Bank Recovery and Resolution Directive (BRRD) for applying simplified obligations.

The proposed draft Guidelines complement the EBA technical standards on resolution planning and resolvability assessment by setting out the circumstances under which resolution authorities can impose measures to overcome obstacles to resolvability identified by the assessment.

More specifically, in case resolution authorities in their resolvability assessment, identify substantive impediments to liquidation in normal insolvency proceedings or to the feasible and credible implementation of resolution powers, the BRRD calls for a removal of such impediments. The proposed Guidelines provide additional details to the list of measures that resolution authorities can take to reduce or remove these impediments as well as to the circumstances under which each of the measures may be applied.

The guidelines do not prescribe or privilege certain business models or organizational 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.

Consultation process

Comments to these consultations can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 9 October 2014.

All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing will take place at the EBA premises on 18 September 2014 from 9:30 to 12:30 UK time.

Legal basis and next steps

The draft technical standards have been developed in accordance with Articles 10, 12 and 15 of Directive 2014/59/EU (BRRD), which mandates the EBA to specify the content of resolution plans for institutions and for groups, as well the criteria which resolution authorities should apply in the resolvability assessment. The proposed Guidelines complete the set of EBA regulatory deliverables on resolution planning and resolvability assessment and are based on Article 17 of the BRRD, which sets out procedural and substantial rules for the reduction or removal of impediments to resolvability.

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772