Question ID:
2015_2078
Legal Act:
Directive 2014/59/EU (BRRD)
Topic:
Simplified obligations
Article:
4
Paragraph:
5
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Article/Paragraph:
n.a.
Disclose name of institution / entity:
No
Type of submitter:
Competent authority
Subject Matter:
EBA Guidelines to assess the impact of an institution's failure on financial markets, on other institutions and on funding conditions (Article 4 (5))
Question:
Shall Article 4 (5) of Directive 2014/59/EU (BRRD) be read in the light of Article 4 (1) the same Directive?
Background on the question:
Article 4 (5) of Directive 2014/59/EU (BRRD) reads: “EBA shall … issue guidelines … to specify the criteria referred to in paragraph 1, for assessing, in accordance with that paragraph, the impact of an institution's failure on financial markets, on other institutions and on funding conditions.” The content of the guidelines as specified in Article 4 (5) seems inconsistent with the criteria laid down in Article 4 (1) of Directive 2014/59/EU (BRRD), which lays out how competent and resolution authorities shall determine: “(a) the contents and details of recovery and resolution plans provided for in Articles 5 to 12; (b) the date by which the first recovery and resolution plans are to be drawn up and the frequency for updating recovery and resolution plans which may be lower than that provided for in Article 5(2), Article 7(5), Article 10(6) and Article 13(3); (c) the contents and details of the information required from institutions as provided for in Article 5(5), Article 11(1) and Article 12(2) and in Sections A and B of the Annex; (d) the level of detail for the assessment of resolvability provided for in Articles 15 and 16, and Section C of the Annex.” and this while having “regard to the impact that the failure of the institution […] and subsequent winding up under normal insolvency proceedings would be likely to have […] on financial markets, on other institutions, on funding conditions, or on the wider economy” Is the inconsistency to be solved by reading Article 4 (5) in the light of Article 4 (1)?
Date of submission:
29/06/2015
Published as Final Q&A:
24/07/2015
EBA Answer:

Yes, Article 4 (5) of Directive 2014/59/EU (BRRD) should be read in the light of Article 4 (1), which refers to the impact of failure due to a number of criteria, which Article 4 (5) requests EBA to specify in more detail to ensure a more consistent approach amongst Member States' practices with respect to determining simplified obligations. Article 4 (5) states that this impact refers to impact on financial markets, on other institutions, and on funding conditions. The same impacts are explicitly referred in Article 4 (1).

Disclaimer:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Status:
Final Q&A
Note to Q&A:
Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Directive 2014/59/EU (BRRD) and continues to be relevant.
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