EBA monitors the use of the proportionality principle for recovery and resolution planning

22 December 2020

The European Banking Authority (EBA) published today its second Report on the application of simplified obligations and waivers under the Bank Recovery and Resolution Directive (BRRD) across the EU. The Report presents the results of the EBA monitoring on how competent and resolution authorities have applied the principle of proportionality for recovery and resolution planning in their respective jurisdictions, and describes the current level of convergence in this area. The EBA observed an increase in a number of authorities applying simplified obligations for less significant banks, especially for resolution planning purposes. There was a higher convergence when assessing which institutions are eligible for simplified obligations. However, significant divergences remained in determining reduced requirements for institutions benefiting from simplified regimes where the regulatory framework does not provide detailed guidance.

The Report highlights that the vast majority of competent and resolution authorities have used their discretion to grant simplified obligations by introducing less strict requirements for some credit institutions and investment firms. The proportion of credit institutions under simplified obligations within particular jurisdictions varied although the highest was typically observed in those Member States with the largest number of banks in Europe.

Just a few EU authorities granted waivers to credit institutions as this is allowed only in those jurisdictions with specific regulatory frameworks for institutional protection schemes (IPS) and credit institutions affiliated to central bodies.     

The Report also highlighted a significantly improved level of harmonisation in the simplified obligations eligibility assessment methodologies applied by competent and resolution authorities compared to 2017. This was mainly driven by the application of the EBA Regulatory Technical Standards (RTS) specifying the conditions for applying simplified obligations that replaced the Guidelines previously issued on the same topic.

Finally, the EBA observed significant differences in the determination by the authorities of the reduced level of BRRD requirements for recovery and resolution plans. Divergent practices have been applied in relation to all possible areas in which such reductions could be introduced by the authorities (i.e. a deadline for preparing the first simplified plans, the frequency of updating the plans, content of the simplified plans, information required from institutions and the simplified resolvability assessment), as the regulatory framework does not provide detailed guidance in this respect.

Note to the editors and background

Article 4(7) of the BRRD requires competent authorities and resolution authorities to inform the EBA of the way they have applied simplified obligations and waivers for recovery and resolution planning to institutions in their jurisdiction. Based on that information the EBA is monitoring the application of simplified obligations and waivers across the European Union.

The BRRD introduces an obligation to prepare and maintain recovery and resolution plans, which in principle is applicable to all credit institutions and certain investment firms. However, the framework also gives competent and resolution authorities the opportunity to grant simplified obligations and waivers to institutions under their jurisdiction, provided that the institutions concerned fulfil specific eligibility criteria.

The EBA published its first Report in December 2017.


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