- Question ID
- Legal act
- Directive 2014/59/EU (BRRD)
- Resolution financing arrangements
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Type of submitter
- Subject matter
Use of the resolution fund
Are the purposes for which a resolution fund can be used exhaustive according to Article 101 of Directive 2014/59/EU (BRRD)?
- Background on the question
The strict interpretation of Article 101of the BRRD is that the financial resources of the national resolution financing arrangement are to be used exclusively for the respective purposes. (”The financing arrangement may be used ...only ...for the following purposes....”). In the Member State's opinion, in order to ensure the operation of the national financing arrangement, Article 101 should be read in a way to allow also the payment of other expenses derived from the exercise of resolution powers from the resource of the national financing arrangement, as may be (the list is non-exhaustive): • interest, charges and fees related to the loans contracted by the national financing arrangement in accordance with Article 105 and 106; • compensations paid according to Article 85(4); • cost of valuations mentioned at Article 36 and 74; • administration costs of the public entity empowered with the management of the national financing arrangement. Our understanding is that the provisions of Article 101 are applicable only in respect of the financial resources of the national financing arrangement collected according to Article 100 up to the target level mentioned at Article 102 of the BRRD and in the national legislation transposing it. As such, the amount of available financial means exceeding the target level may be used to finance other actions that serve the same purpose as the resolution fund (e.g.: having in mind that the deposit protection is a joint objective of the resolution and the deposit guarantee scheme, the available financial means exceeding the target level might be borrowed by the deposit guarantee scheme in order to ensure the exercising of its specific powers according to Article 10(4) of Directive 2014/49/EU on deposit guarantee schemes).
- Submission date
- Final publishing date
- Final answer
The list of purposes for which the resolution fund can be used under Article 101 of Directive 2014/59/EU (BRRD) is exhaustive (e.g. the RF cannot be used to build highways) but is without prejudice to other uses that would necessarily derive from other Articles (e.g. reimbursing a loan or paying interests on loans).
However the general administration costs of the resolution fund should not be paid with money counted towards the target level. Such costs may be borne by banks but only via separate contributions.
The interpretation suggested is doubtful because Article 101 of the BRRD on the use of funds does not distinguish on whether the available financing means are below or above the target level.
While the BRRD does not prevent Member States from setting a higher target level and collecting contributions according to Article 103 beyond 1% of covered deposits, it is not meant to finance other purposes than those laid down in Article 101. Therefore it would seem appropriate to either stick to the use of funds laid down in Article 101, or separate in a transparent manner those funds that can be used for other purposes from those that are counted towards the target level.
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.
- 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.