How to Make Cross-border Resolution Effective Dr. Axel Kunde, Head - - PowerPoint PPT Presentation

The SRM Regulation: How to Make Cross-border Resolution Effective

• Dr. Axel Kunde, Head of Unit Resolution Planning and Decisions

Single Resolution Board

• 2. Allocation of tasks within the SRM from 2016

Index

• 3. SRM Governance: approval of resolution plans
• 1. Resolution framework in the EU and the SRM

BRRD is a significant step (…) However, the Directive only establishes minimum harmonisation rules and does not lead to centralisation of decision making …

Bank Recovery and Resolution Directive transposed in all 28 EU Member States

Resolution framework in the EU

Resolution tools Recovery and resolution plans Trigger for resolution Government stabilization tools Scope and institutional framework Resolution Fund Cross Border Agreements

Content of the BRRD

SRB constitution

• BBRD: Directive 2014/59/EU for the recovery and resolution of credit institutions
• SRMR: Regulation (EU) No 806/2014

For participating Member States, in the context of the Single Resolution Mechanism (SRM), a centralised power of resolution is established and entrusted to the Single Resolution Board established in accordance with this Regulation and to the national resolution authorities. That establishment is an integral part of the process

• f harmonisation in the field of resolution
• perated by Directive 2014/59/EU … (SRMR)

Regulation to create the Single Resolution Mechanism adopted by 19 Member States

• f the Euro area (but open to all EU states)

The Single Resolution Board (SRB) is the resolution authority within the European Banking Union and is a key element of the newly created Banking Union.

Participating Member State (Euro area) Non-participating Member State (non- Euro area)

Mission: to ensure an orderly resolution of failing banks with minimum impact on the real economy and public finances of the participating Member States and beyond

Bank falls into trouble Existing recovery plan is used to try and recover Recovery fails ECB determines that bank is likely to fail and informs SRB SRB finds systemic threat and/or critical functions and no private alternative Resolution scheme submitted to Commission Under supervision from the SRB, NRAs implement plan/ resolution scheme

anticipates resolution uses existing plan/decides resolution scheme

SRB Function of the Single Resolution Board (SRB)

In charge of resolution planning, decisions and execution

• f

resolution measures for LSIs. In charge of executing resolution decisions of the SRB in their jurisdictions. NRAs

SRB

In charge of resolution planning, decisions and monitoring execution of resolution decisions for :

• Significant institutions

(SI) under the direct supervision of the ECB

• Less significant

institutions (LSI) with cross-border activities

Non Euro RA

Third Countries’ RA Resolution College Crisis Management Group

EURO AREA

SRB Monitoring SRB Coordination

Allocation of tasks within the SRM from 2016

Engagement with non participating Member States and third countries

• According to Article 28 SRMR, the SRB "shall closely monitor the execution of the

resolution scheme by the national resolution authorities".

• The NRAs have to provide to the SRB upon request, at regular intervals,

information on the execution of the resolution scheme, the application of the resolution tools and the exercise of resolution powers.

• The SRB may give specific instructions to the NRAs as to any aspect of the

execution of the resolution scheme.

• The NRAs have to take the necessary action to implement SRB decisions,

including specific instructions, by exercising their powers under national law transposing the BRRD.

• If an NRA has not complied with a SRB decision, the SRB may:
• Directly order an institution under resolution to (i) transfer to another person

specified rights, assets or liabilities; or (ii) require the conversion of any debt instruments which contain a contractual term for conversion.

• In addition, the SRB may order an institution "to adopt any other necessary

action" to comply with the SRB decision.

SRB’s monitoring role on execution of resolution schemes

• The SRB has the overall responsibility for the effective and consistent

functioning of the SRM.

• The NRAs are required to inform the SRB if they intend to take certain

measures, including the adoption of resolution decisions and the application of resolution tools.

• The SRB may also take certain actions in relation to such entities. In particular, if

a draft decision does not comply with the SRM Regulation or with the SRB's general instructions, the SRB may issue a warning to the NRA concerned.

• As a last resort, the SRB may decide to "take over" from the NRA the direct

power and responsibility for an entity.

• National Resolution Funds cannot be used anymore for the entities and groups

that fall under the scope of the SRM. Therefore, if the resolution of a less- significant institution requires the use of the Single Resolution Fund, the SRB takes also the resolution decisions.

SRB coordination role in relation to LSIs

SRB Governance Plenary and Executive Sessions´ Tasks

SRB/SRM

Executive Session (Chair + Vice-Chair + 4 permanent Board Members + NRAs when relevant + Observers)

Resolution decision

Resolution scheme – exception – use of SRF above 5bn EUR

Commission Council

(a) non-objection procedure for resolution schemes (b) Objection – Not fulfil public interest test

Resolution scheme

Plenary Session (Chair + Vice- Chair + 4 perma- nent Board Members + NRAs + Observers)

Approval of Resolution Plans

Executive Session

• Decides on all

resolutions including on the use of the single resolution fund.

Plenary Session

• Meets at least bi-

annually

• For general matters not

related to a particular resolution.

Decisions in the Executive Session made by 5 voting members only (Vice-chair

• nly votes, if Chair is absent)

Approval of resolution plans Banks active purely inside the Banking Union (BU)

Banks under the direct responsibility of the SRB and active solely in BU IRTs draft group resolution plan/MREL determination/report on impediments Consultation of ECB/NCAs and NRAs SRB Executive Session approves resolution plans/MREL/report on impediments Banks under the direct responsibility of NRAs in the BU NRAs drafts resolution plans subject to guidelines and general instructions of SRB NRAs notify material decisions and submit resolution plans to SRB SRB adopts resolution scheme in case the SRF is used

• For purely BU groups process involves setting up Internal Resolution Teams (IRTs),

developing resolution strategies and drafting resolution plans

Resolution Colleges: Coordination within the EU

• The SRB shall set up a resolution college whenever an SRB bank has at least one

subsidiary or significant branch in a participating Member State and another one in a non-participating Member State (Art 12, 13, 16, 18, 45 and 88-92 BRRD, and the EBA draft RTS on resolution colleges)

• "The resolution college should not be a decision-making body, but a platform

facilitating decision-making by national authorities. The joint decision should be taken by the national authorities concerned." (recital 98 of BRRD)

• Joint decisions should be taken on:

─ Group resolution plan and resolvability assessment ─ Minimum requirements for own funds and eligible liabilities (MREL) ─ Measures to address substantive impediments to resolvability (if needed) ─ Group resolution scheme (if needed)

• Joint decisions are to be taken by the resolution authorities of the group and

subsidiaries, after consulting the other members and observers of the college. If there is no unanimity: ─ Binding mediation by the European Banking Authority (EBA) ─ Partial joint decisions ─ Individual decisions

Resolution Colleges: Members and key roles

Members Key roles within the College Group-level resolution authority  Chairs & co-ordinates resolution college  Prepares and circulates draft and final reports and joint decision documents  Communicates with the Union parent undertaking and the consolidating supervisor  Determines MREL for the parent undertaking  Takes joint decisions Resolution authority of subsidiaries  Communicates with the subsidiaries and the competent authority in its member state  Proposes MREL at individual level for subsidiaries  Takes joint decisions Consolidating supervisor  Consulted on joint decisions Competent authority  Consulted on joint decisions Deposit Guarantee Scheme  Consulted on joint decisions Competent ministry  Consulted on joint decisions EBA (non voting member)  Promotes and monitors the efficient and consistent functioning of the college  Acts as a mediator if consulted

Observers: Resolution authorities of subsidiaries or significant branches in third countries may be invited to participate as

• bservers

Thank you!