EBA asks authorities to increase transparency on their approach to bail-in in case of banking failure
The European Banking Authority (EBA) published today its final Guidelines addressed to resolution authorities for the publication of their approach to the bail-in tool implementation. Transparency and predictability are key both to the credibility of the resolution framework and to the safeguard of investors’ protection. These Guidelines aim at ensuring that a minimum level of harmonised information on how authorities would effectively execute the write down and conversion of capital instruments and the use of the bail-in tool (“exchange mechanic”) is made public.
Bail-in is the main tool available to authorities to avoid using tax-payers’ money in case of failure of a large bank. It is a complex and largely untested tool. To ensure that authorites’ approach is credible and that institutions have the necessary information to prepare, the EBA is asking authorities that have not yet done so to start publishing, from January 2024, a high-level document setting out the key aspects of their favoured approach. In particular, they are asked to specify if they intend to make use of interim instruments and to set out a timeline of the bail-in process. Those authorities that have already published information are expected to check if that publication complies with these Guidelines.
Following input from the consultation, the document to be published by authorities will also include (i) clear description of potential interim instrument, (ii) further details for the timeline and (iii) where available, indicative templates or the main features of the legal instruments to be used to formally implement bail-in.
Note to the editors
These guidelines have been issued pursuant to Article 16 of Regulation (EU) No 1093/20101. In accordance with Article 16(3) of Regulation (EU) No 1093/2010, competent authorities and financial institutions must make every effort to comply with the guidelines.
The EBA has recently initiated several initiatives aiming to harmonise approaches to resolvability at EU-27 level and ensure implementation of international standards on the matter. These Guidelines complement the already published Guidelines for institutions and resolution authorities on improving banks’ resolvability and the draft guidelines on transferability. A consultation is on-going on resolvability testing and further work is underway on the topic of resolvability transparency.
Guidelines on the publication of the write-down and conversion and bail-in exchange mechanic
(304.67 KB - PDF) Last update 5 April 2023
Franca Rosa Congiu