27 May 2021
The European Banking Authority (EBA) published today a Report on the application of early intervention measures under the Bank Recovery and Resolution Directive (BRRD). The Report highlights the key challenges faced by supervisors in the application of the current regulatory framework on the EIMs and various options for addressing them. The Report follows the Discussion Paper launched in June 2020 to explore ways of enhancing crisis management tools available for competent authorities in addition to well-established and widely used supervisory powers laid down in the Capital Requirements Directive (CRD) and in the Single Supervisory Mechanism Regulation (SSMR).
The BRRD introduced early intervention measures (EIMs) to expand the existing set of powers available to supervisors when institutions are experiencing difficulties. The EBA monitored the application of EIMs in 2015-2018 and observed their limited use across the European Union. Instead of resorting to EIMs, competent authorities often preferred to apply other pre-BRRD supervisory powers available to them.
The EBA investigated the reasons for these supervisory practices and in June 2020, published a Discussion Paper including its preliminary findings on the most important implementation issues in the area of EIMs and possible solutions on how to address them. The Report published today concludes the EBA’s work on EIMs and also provides an overview of the feedback received from public consultations as well as the EBA conclusions.
The EBA observed supervisory consensus on the need to eliminate existing overlaps between EIMs and other supervisory powers, as well as to remove the formal sequencing of EIMs specified in Articles 27-29 of the BRRD. In addition, the EBA observed that competent authorities supported the importance of amending Article 27(1) of the BRRD that includes an example of a quantitative early intervention trigger. For early intervention triggers specified in regulatory technical standards (e.g. based on SREP scores or monitoring of key risk indicators), the EBA will conduct further work and amend its current Guidelines on the EI triggers upon finalisation of the ongoing review of the BRRD.
The EBA has drafted this discussion paper and report on early intervention in accordance with Article 27(5) of the BRRD in relation to the monitoring of the application of the EBA Guidelines on early intervention triggers (EBA/GL/2015/03).
The DP on EIMs brought the key challenges in the implementation of the EIMs framework to the attention of the EU legislators and the European Commission is currently working on revising the existing BRRD provisions on EIMs.
Franca Rosa Congiu