Shall Should the suggested resolution plans assume both the possibility of usage of Multiple Point of Entry (MPE) and Single Point of Entry (SPE) strategies depending on different scenarios and causes of failure or should they clearly identify a preferred strategy and elaborate only on the different resolution tools within this strategy?

Article 10 (7) of Directive 2014/59/EU (BRRD) states that the resolution plan shall consider different scenarios, as a result of which the resolution authority will be empowered to require entities to remove impediments (to resolvability) to the different options of resolution proceedings. Within resolution strategies, two main approaches can be distinguished between: Multiple Point of Entry (MPE) and Single Point of Entry (SPE). Shall the suggested resolution plans assume the possibility of usage of both these strategies depending on different scenarios and causes of failure or it should clearly identify a preferred strategy and elaborate only on the different resolution tools within this strategy? (in case of bail-in MPE and SPE require to create loss absorbing capacity on different levels of the group).

The answer(s) to this question is discussed within context of the EBA final draft Regulatory Technical Standards (RTS) on resolution planning and final Guidelines on measures to reduce or remove impediments to resolvability, and hence dependent on the final adoption of the RTS by the European Commission.

Pursuant to Article 12(1), second subparagraph of Directive 2014/59/EU (BRRD), the resolution plan must identify for each group the resolution entities and the resolution groups. It follows that the resolution plan must opt either for a Multiple Point of Entry (MPE) strategy or for a Single Point of Entry (SPE) strategy, and, based on that choice, develop the possible resolution actions.

This is confirmed by Article 25 of Commission Delegated Regulation (EU) 2016/1075 (DR), which requires resolution authorities to assess whether it would be more appropriate to apply an MPE or an SPE strategy to groups and further lists the elements that should be taken into account for the purposes of that choice.

Without prejudice to the above, Article 25(4) DR prescribes that resolution authorities are to assess whether variants of the resolution strategy are necessary to address scenarios or circumstances where the resolution strategy cannot be feasibly and credibly implemented.

Disclaimer:

The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.

Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Directive 2014/59/EU (BRRD).

Update 02.12.2021: This Q&A has been updated in the light of the changes introduced to Directive 2014/59/EU (BRRD).