Question ID:
2015_2519
Legal Act:
Directive 2014/59/EU (BRRD)
Topic:
Resolution objectives and triggers
Article:
32, 82
Paragraph:
1, 2
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:
Determination of exhaustion of supervisory action by the resolution authority
Question:

How can the resolution authority determine in the context of the determination that an institution is failing or likely to fail that supervisory action(s) by the competent authority has / have been exhausted and would not prevent the failure of the institution within a reasonable timeframe?

Background on the question:

Article 32 (1) (a) (b) (c) of Directive 2014/59/EU (BRRD) provides that Member States shall ensure that resolution authorities shall take a resolution action in relation to an institution referred to in point (a) of Article 1(1) only if the resolution authority considers that all of the following conditions are met:

(a) the determination that the institution is failing or is likely to fail has been made by the competent authority, after consulting the resolution authority or, subject to the conditions laid down in paragraph 2, by the resolution authority after consulting the competent authority;

(b) having regard to timing and other relevant circumstances, there is no reasonable prospect that any alternative private sector measures, including measures by an IPS, or supervisory action, including early intervention measures or the write down or conversion of relevant capital instruments in accordance with Article 59 (2) taken in respect of the institution, would prevent the failure of the institution within a reasonable timeframe;

(c) a resolution action is necessary in the public interest.

Date of submission:
11/12/2015
Published as Final Q&A:
28/10/2016
Final Answer:

Article 82(2) of Directive 2014/59/EU (BRRD) requires that the decision of the resolution authority contains the reasons for the determination that the institution meets the conditions for resolution. This implies the need for a consultation with a competent authority in order to determine there is no reasonable prospect for alternative private sector measures or supervisory action to prevent failure of the institution within a reasonable timeframe.

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
Answer prepared by:
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
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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