Summary Wed, 05/20/2015 - 06:14
The European Banking Authority (EBA) published three sets of final Guidelines aimed at facilitating the implementation of resolution tools in the banking sector across the EU. These Guidelines, which stem from the EU Bank Recovery and Resolution Directive (BRRD), foster convergence on resolution matters by giving detailed guidance to EU Resolution Authorities on the circumstances they should assess when taking their resolution decisions.
The first two sets of Guidelines describe how constraints to resolution tools resulting from competition and transparency requirements should be interpreted; their aim is to ensure an efficient and consistent implementation of these tools across the EU.
In particular, the Guidelines on the ‘sale of business tool' specify that Authorities may deviate from the standard marketing requirements for the sale of the business of an institution under resolution, if the failure of the institution represents a material threat to financial stability and there is a conflict between the effectiveness of the tool and the marketing requirements. The Guidelines provide a list of elements for Authorities to assess threats to financial stability and conflicts with marketing requirements.
The Guidelines on the ‘asset separation tool' provide guidance on what assets may be transferred under the ‘asset separation tool' to an asset management vehicle (‘bad bank'). The analysis of these assets should be carried out over three steps according to the Guidelines: assessing the market situation for the assets concerned, the impact that their liquidation may have on markets and the effects that may result on financial stability.
The third set of Guidelines, on ‘necessary services', define a minimum list of necessary ‘critical' services that Resolution Authorities may require from institutions under resolution (i.e. the purchaser after a sale of business, a bridge bank or the transferee after a transfer of assets). This list aims to be as comprehensive as possible in order to allow for the highest possible degree of harmonisation of practices across the EU.
These Guidelines take into account the Financial Stability Board (FSB) guidance on critical shared services and they reflect the recent international discussion and commitments of the G20 members for efficient resolutions.
Legal basis and next steps
The Guidelines have been developed according to Articles 39, 42 and 65 of the BRRD, which mandate the EBA to promote convergence of supervisory and resolution practices on the effectiveness of the sale of business tool, on the conditions for applying the asset separation tool and on the power to require the provision of services following a transfer under resolution.
These Guidelines are addressed to Competent Authorities and will apply from 1 August 2015. 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.