Question ID
2015_1788
Legal act
Directive 2014/59/EU (BRRD)
Topic
Simplified obligations
Article
4
Paragraph
10
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
1
Type of submitter
Competent authority
Subject matter
Simplified obligations regarding recovery and resolution plans for a subsidiary constituting a significant share in the financial system of a Member State
Question

Is a competent authority in charge of the supervision of a subsidiary constituting a significant share in the financial system of their Member State (according to paragraph 10 of Article 4 Directive 2014/59/EU (BRRD), to submit that request during the process of the assessment of group recovery plans if they want that subsidiary (part of the EU group with parent institution in another Member State) to draw up and submit a recovery plan on an individual basis, required (according to Article 7. paragraph 2) in order for that fact to form part of the joint decision regarding the group recovery plan or is the competent authority allowed to require individual plans to be drawn up independently from joint decision process prescribed in Article 8 of the BRRD? Is a resolution authority in charge of a subsidiary constituting a significant share in the financial system of their Member State (according to Article 4(10) of the BRRD ), if they want to prepare individual resolution plan for that subsidiary (part of the EU group with parent institution in another Member State), allowed to define topics of the resolution plan such as resolution strategy, measures to remove impediments to that strategy and MREL for that particular subsidiary separately from the joint decision process defined in Articles 13, 16, 18 and 45h of the Directive 2014/59/EU (BRRD)?

Background on the question

According to Article 4 (10) of Directive 2014/59/EU (BRRD)"Simplified obligations for certain institutions" prescribes that: institutions subject to direct supervision by the European Central Bank pursuant to Article 6(4) of Council Regulation (EU) No 1024/2013 or institutions constituting a significant share in the financial system of a Member State shall: draw up their own recovery plans in accordance with Section 2 of this Chapter and be the subject of individual resolution plans in accordance with Section 3. For the purposes of this paragraph, the operations of an institution shall be considered to constitute a significant share of that Member State's financial system if any of the following conditions are met: (a) the total value of its assets exceeds EUR 30 000 000 000; or (b) the ratio of its total assets over the GDP of the Member State of establishment exceeds 20%, unless the total value of its assets is below EUR 5 000 000 000.

Submission date
Final publishing date
Final answer

Article 4(10) of Directive 2014/59/EU (BRRD) should be interpreted in the context of Article 4 relating to simplified obligations. This Article includes also a possibility of waiving recovery or resolution planning requirement for certain institutions, namely for members of IPS or institutions affiliated to a central body (see Article 4(8) BRRD. These types of institutions should be situated within the same Member State (by virtue of Articles 10 and 113(7) of Regulation No 575/2013 CRR)). Article 4(10) of the BRRD is intended to limit the scope for waiving the recovery and resolution planning requirement, stating that if such individual institutions are under the direct supervision of ECB or constitute a significant share of that Member States' financial system, then the requirements cannot be waived.

In the context of group recovery and resolution planning requirements (for non-IPS and non-networks of institutions affiliated to central body) in cross border context, provisions on joint- decision apply. This includes Articles 8 of the BRRD for group recovery planning and Article 13 of the BRRD for group resolution planning. These Articles do not require plans for individual entities of the group but there is a possibility for a host authority to require a separate plan for the entity under its jurisdiction if it does not agree with group level plans.                                                                                         

In this regard, Recital 33 of the BRRD states that the relevant authorities should make every effort to reach a joint decision on the assessment and adoption of group plans. 

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 updated in the light of the changes introduced to Directive 2014/59/EU (BRRD).

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.