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

Transcription

1 The SRM Regulation: How to Make Cross-border Resolution Effective Dr. Axel Kunde, Head of Unit Resolution Planning and Decisions Single Resolution Board

2 Index 1. Resolution framework in the EU and the SRM 2. Allocation of tasks within the SRM from SRM Governance: approval of resolution plans

3 Resolution framework in the EU Bank Recovery and Resolution Directive transposed in all 28 EU Member States Content of the BRRD Scope and institutional framework Recovery and resolution plans Trigger for resolution Resolution tools Government stabilization tools Resolution Fund Cross Border Agreements Regulation to create the Single Resolution Mechanism adopted by 19 Member States of the Euro area (but open to all EU states) SRB constitution 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 of harmonisation in the field of resolution operated by Directive 2014/59/EU (SRMR) 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. BRRD is a significant step ( ) However, the Directive only establishes minimum harmonisation rules and does not lead to centralisation of decision making BBRD: Directive 2014/59/EU for the recovery and resolution of credit institutions SRMR: Regulation (EU) No 806/2014

4 anticipates resolution Function of the Single Resolution Board (SRB) 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 Participating Member State (Euro area) Non-participating Member State (non- Euro area) 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 SRB uses existing plan/decides resolution scheme Under supervision from the SRB, NRAs implement plan/ resolution scheme

5 Allocation of tasks within the SRM from 2016 EURO AREA Non Euro RA Crisis Management Group Resolution College 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 Third Countries RA Engagement with non participating Member States and third countries NRAs In charge of resolution planning, decisions and execution of resolution measures for LSIs. In charge of executing resolution decisions of the SRB in their jurisdictions. SRB Coordination SRB Monitoring

6 SRB s monitoring role on execution of resolution schemes 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.

7 SRB coordination role in relation to LSIs 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 lesssignificant institution requires the use of the Single Resolution Fund, the SRB takes also the resolution decisions.

8 SRB Governance Plenary and Executive Sessions Tasks Executive Session - Decides on all resolutions including on the use of the single resolution fund. Plenary Session - Meets at least biannually - For general matters not related to a particular resolution. SRB/SRM Executive Session (Chair + Vice-Chair + 4 permanent Board Members + NRAs when relevant + Observers) Approval of Resolution Plans Resolution decision Resolution scheme Plenary Session (Chair + Vice- Chair + 4 permanent Board Members + NRAs + Observers) Resolution scheme exception use of SRF above 5bn EUR Decisions in the Executive Session made by 5 voting members only (Vice-chair only votes, if Chair is absent) Commission (a) non-objection procedure for resolution schemes (b) Objection Not fulfil public interest test Council

9 Approval of resolution plans Banks active purely inside the Banking Union (BU) For purely BU groups process involves setting up Internal Resolution Teams (IRTs), developing resolution strategies and drafting resolution plans 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

10 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 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

11 Resolution Colleges: Members and key roles Members Group-level resolution authority Resolution authority of subsidiaries Key roles within the College 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 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 observers

12 Thank you!