Final and translated into the EU official languages
The Guidelines on the triggers for using early intervention measures (triggers for early intervention) ensure continuum between the on-going supervision conducted by national authorities in line with the CRD, and the Bank Recovery and Resolution Directive (BRRD). They aim at promoting convergence of supervisory practices in relation to how to apply early intervention measures.
The European Banking Authority (EBA) launched today a consultation on two draft Guidelines on (i) the triggers for using early intervention measures (triggers for early intervention) and on (ii) the circumstances under which an institution shall be considered as ‘failing or likely to fail' (triggers for resolution). Both Guidelines ensure continuum between the on-going supervision conducted by national authorities in line with the CRD, and the Bank Recovery and Resolution Directive (BRRD). They aim at promoting convergence of supervisory and resolution practices in relation to how resolution should be triggered and how to apply early intervention measures. The consultations run until 22 December 2014.
The new BRRD regulatory framework has introduced a common set of early intervention measures that complement existing supervisory powers and measures, established under the CRD and applied according to the EBA Guidelines for common procedures and methodologies for SREP. The Guidelines on triggers for early intervention issued today by the EBA are addressed to competent authorities and clarify the conditions for using early intervention measures foreseen by the BRRD. The triggers for early intervention are to a large extent based on the outcomes of the SREP, expressed both in terms of Overall SREP score and scores for individual SREP elements. The draft Guidelines also provide the possibility of triggering early intervention measures on the basis of significant events and material deterioration or anomalies in the key indicators monitored by the competent authorities, before they are fully reflected in the SREP scores.
Determining that an institution is failing or likely to fail is the necessary element to start any resolution process. This determination is made by the relevant competent authority, but Member States may grant this power to the relevant resolution authority too. In this regard, the draft Guidelines provide separate guidance for the competent authorities, where the determination is based primarily on the outcomes of the SREP assessment of the viability of an institution, and for the resolution authorities, where the determination is based on the objective elements specified in the Guidelines (which cover an institution's capital and liquidity position, as well as other requirements for continuing its authorisation).
While respecting the functional and operational independence of competent and resolution authorities, the Guidelines aim to ensure consistency in the outcome of their assessment of whether an institution is failing or likely to fail. In particular, the core areas to be assessed (i.e. capital position, liquidity position and other requirements for continuing authorisation) are covered both in the objective elements for the resolution authorities and in the SREP assessment conducted by the competent authorities. The scope of the draft Guidelines on resolution triggers is expanded to provide guidance on the consultation, as well as information exchange between the competent authorities and resolution authorities in order to determine if an institution is failing or likely to fail. The goal is to enhance coordination of supervisory and resolution practices.
The Guidelines published for consultation complement the EBA Guidelines for common procedures and methodologies for SREP and together they form a set of supervisory guidance linking on-going supervision, early intervention and resolution.
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 22 December 2014.
All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing will then take place at the EBA premises on 10 November 2014 from 14.00 to 17.00 UK time.
Legal basis and next steps
The proposed Guidelines are based on Articles 27(4) and 32(6) of the BRRD, which mandate the EBA to promote convergence of supervisory and resolution practices on the circumstances determining when an institution is ‘failing or likely to fail' and on the consistent application of triggers for early intervention measures.
The European Banking Authority (EBA) published today its final Guidelines on triggers for the use of early intervention measures. These Guidelines aim at promoting convergence of supervisory practices in relation to the application of early intervention measures as provided for in the Bank Recovery and Resolution Directive (BRRD). The Guidelines establish a link between the on-going supervision conducted by the Competent Authorities according to the Capital Requirement Directive (CRD) and the early intervention powers set out in the BRRD.
The Guidelines clarify the conditions for the application of early intervention measures provided for in the BRRD. In particular, the Guidelines provide Competent Authorities with the set of triggers that should prompt the decision on the application of early intervention measures.
The triggers provided in the Guideline are, to a large extent, based on the outcomes of the supervisory review and evaluation process (SREP), in particular, on the scores resulting from the assessment conducted by the Competent Authorities in accordance with the EBA Guidelines on common procedures and methodologies for the SREP.
The Guidelines also recognise that early intervention measures can also be triggered on the basis of other circumstances which might not be immediately factored into the outcomes of the SREP assessment, such as significant events or material deterioration or anomalies in the key indicators monitored by Competent Authorities as part of the SREP. However, the Guidelines do not establish any quantitative thresholds for indicators that could be perceived as new capital or liquidity requirements.
Article 27(4) of the Directive 2014/59/EU (BRRD) introduced a common set of early intervention measures that complement existing supervisory powers and measures, established under the CRD and applied according to the EBA Guidelines on common procedures and methodologies for SREP (EBA/GL/2014/13) published in December 2014.
The EBA has conducted a public consultation on the Guidelines on triggers for early intervention and the final text published today reflects its outcomes.
These Guidelines are addressed to Competent Authorities and will apply from 1 January 2016. Following the publication of the English version, the EBA will make available, in due course, the translations of the Guidelines in all EU languages. Within two months from the publication of the translated Guidelines, Competent Authorities shall confirm to the EBA their compliance status, which will be disclosed on the EBA website.
The Guidelines complement the EBA Guidelines on common procedures and methodologies for SREP; and Guidelines on the circumstances under which an institution shall be considered as ‘failing or likely to fail' (triggers for resolution). These three Guidelines together form a set of supervisory guidance linking on-going supervision, early intervention and resolution.