Re Resolution planning: Legal framework and pr prac actic ical al expe perie ienc nce Ewa Klima Ewa Dep eputy Gen ener eral Counsel el Single e Res esolution Board l Malta, June 9, 2017
TABLE OF CONTENTS 1. SRB’s mission & tasks 2. Resolution planning 3. Credibility & feasibility of insolvency proceedings 4. Identification of preferred resolution strategy 5. Determination of MREL 6. Impediments to resolvability 7. Adoption of the resolution plan 8. Practical experience and challenges l 2
SR SRB’S S MISSI SSION & TASK SKS The mission of the SRB is to ensure an orderly • The SRB together with the National Resolution resolution of failing banks with minimum impact on the Authorities (NRAs) forms the Single Resolution real economy and the public Mechanism. finances of the participating Member States of the Banking Union. • The SRB is directly responsible for: FI - Significant banks SE - Cross-border banking groups EE Member States in the Eurozone LV DK IE LT • SRB’s main tasks: UK Member States NL not in the PL BE DE Eurozone - Resolution planning LU CS SK FR AT HU - Resolution action RO PT ES IT BG - Single Resolution Fund (SRF) EL l 3
RE RESOLUTI TION PLAN ANNING Assessment of feasibility & fe RESOLUTION credibility cr y of PLANNING normal inso nsolvenc ncy proceedings IS AN IT ITER ERATIV IVE E PROC PR OCESS If neg If egativ ive , Addressing Ad g identification imp imped edimen iments of re resolution to to st strategy re resolvability RESOLUTION PLANNING Id Iden entific ificatio ion Assessment of of of fe feasibility & Resolution plans imped imp edimen iments cr credibility y of are to be dr drafted d to resolvability to the preferred resolution re and and upda updated d strategy st De Determination on at le at leas ast annually annually of of MREL l 4
CR CREDIBI BILI LITY & FEASIBI BILI LITY OF INS NSOLVENCY NCY PR PROCE CEEDING NGS 1. Insolvency proceedings are credible when there is no material adverse impact on: ü financial market functioning and market confidence; ü financial market infrastructures; ü other financial institutions; ü the real economy and in particular the availability of critical financial services. 2. Insolvency proceedings are feasible when the entity: ü has systems that are able to provide the information required by the deposit guarantee scheme, in inclu ludin ing on cover ered ed dep eposit it ba balanc nces ; ü is capable of supporting the deposit guarantee scheme’s operations, by by disti tingu guishing g betw tween covered and non-co co covered balances of deposits acco counts . l 5
IDENTIF ID IFIC ICATIO ION O OF P PREFERRED R RESOLUTIO ION S STRATEGY RE RESOLUTION AP APPROACH Different to tools can be used to sa safeguard Si Singl gle po point of entry ap approac ach interests , including the continuity of the bank’s public in public critical functions and financial stability, at minimal The application of resolution costs to taxpayers. powers by a single resolution authority at the level of a single SALE OF BUSINESS BRIDGE BANK TOOL parent company or of a single Part or all of the shares or Part or all of the shares or institution subject to consolidated other instruments of other instruments of supervision ownership or assets, right and ownership or assets, right and liabilities can be sold to a liabilities can be transferred private purchaser to a temporary entity. Multi Mu tiple po point of entry ap approac ach RESOLUTION TOOLS Liabilities can be written Assets, rights and liabilities The application of resolution down and converted, can be transferred to an asset placing the burden on powers by two or more resolution management vehicle, totally shareholders and or partially publicly owned, if authorities to regional sub-groups creditors of the bank liquidation of the assets could rather than on the public. cause market disruption. or entities of a bank ASSET SEPARATION TOOL BAIL-IN FS FSB Guidance on developing ef effective resolution strat ategies l 6
DE DETERMINA NATION N OF F MREL Ø In order to ensure the effectiveness of the bail-in tool, entities should at all times meet a Mi Mini nimum um Requi equirem remen ent for r own n funds unds and and Eligi gibl ble e Liabi abilities es , expressed as a percentage of the total liabilities and own funds. Ø MREL should not exceed the amount sufficient to ensure that losses are absorbed and the capital requirements of the relevant entities restored to enable them to continue being authorised and to operate with sufficient market confidence. The MREL determination is done on a Eligible liabilities are included when: case by case basis according to certain • issued and fully paid up criteria: not owed to/secured to/guaranteed by • the entity itself size, business model, funding model & • their purchase not funded directly or risk profile • indirectly by the entity itself extent of possible DGS contribution; • • maturity is of ≥ 1 year possible significant adverse • not arising from a derivative consequences for the financial system in • • not arising from covered or preferred case of failure of the entity deposits l 7
IMPEDIM IM IMENTS T TO R RESOLVABIL ILIT ITY • Identification of impediments to resolvability: Procedure: - structure and operations; financial resources; information; cross-border 1. Identification of substantive issues; legal issues. impediments, after consulting the • Measures to address impediments to supervisor resolvability include, inter alia, to require: 2. Preparation of report addressed to the bank, in cooperation with the - the revision of any intragroup financing supervisor agreements or drawing up of SLAs; 3. Proposal of possible measures by the - the divestment of specific assets; bank within four months - the limitation/termination of specific 4. Assessment of the effectiveness of the activities; proposed measures by the SRB, after - changes to legal or operational consulting the supervisor structures of the entity; 5. If negative assessment, requiring the - the issuance of eligible liabilities or bank to take specified measures taking any other steps to meet the MREL requirements. l 8
AD ADOPTI TION OF F TH THE RE RESOLUTI TION PLAN AN (I (INV NVOLVING NG RESOLUTION N COLLEGE) l 9
PRACTICA PR CAL L EXPE PERIENCE CE AND CH CHALLE LLENGES 1. Information exchange and data quality - Banks - Supervisory authorities and other relevant EU and national authorities 2. Cooperation and institutional arrangements - At the level of EU institutions - Within the Banking Union - Wider EU - Third countries 3. Novelty and uncertainty - Precedent and new legal environment - Expertise l 10
TH THAN ANK YOU For more information, please contact: ca camille.de-re rede@srb.europa.eu l
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