Page 39 - EBA 2015.1815 Annual report 2014 web 2

Basic HTML Version

2 0 1 4 a n n u a l r e p o r t
37
identified in the assessment and also specify
the measures that can be taken to reduce or
remove these impediments.
The EBA also published draft RTS for con-
sultation on the operational functioning of
resolution colleges which provide a forum for
resolution authorities of cross border banking
groups to reach the necessary joint decisions
on both resolution planning and resolution.
These RTS draw on the broad experience of
supervisors in colleges, which is applied to the
process of resolution colleges. These RTS also
detail the involvement of supervisory colleges
in the framework of resolution colleges to en-
sure consistency and cooperation between the
two forums.
Early intervention measures
The new BRRD regulatory framework intro-
duced a common set of early intervention
measures that complement existing super-
visory powers and measures, established
under the CRD and applied according to the
EBA guidelines for common procedures and
methodologies for the SREP. In 2014, the EBA
launched a public consultation on the draft
guidelines on triggers for early intervention
which are addressed to competent authori-
ties and clarify the conditions for using meas-
ures foreseen by the BRRD. The triggers are,
to a large extent, based on the outcomes of
the SREP, expressed both in terms of overall
SREP score and scores for individual SREP el-
ements. The guidelines complement the pre-
vious EBA guidelines for common procedures
and methodologies for SREP.
Resolution
The resolution process includes various phas-
es including an assessment as to whether the
institution is failing or likely to fail, valuation,
application of resolution tools and resolution
powers where the EBA has already finalised
or is in the process of developing a number of
regulatory products(Figure 7).
Failing or likely to fail
Determining whether an institution is failing
or likely to fail is the first step in any resolution
process. The guidelines on the circumstances
under which an institution is be considered
as ‘failing or likely to fail’ (triggers for resolu-
tion) ensure continuum between the ongoing
supervision conducted by national authorities
in line with the CRD, and the BRRD. They aim
at promoting convergence of supervisory and
resolution practices in relation to how reso-
lution should be triggered. These guidelines
complement the EBA guidelines on early in-
tervention triggers and guidelines for com-
mon procedures and methodologies for SREP.
These three guidelines form a set of supervi-
sory guidance linking on-going supervision,
early intervention and resolution.
In the event of an institution being determined
as failing or likely to fail, as defined under the
BRRD, a notification process must be followed
to ensure the necessary next steps are under-
taken with regards to the institution’s resolu-
tion. In this context, the EBA has developed
draft RTS on notification requirements speci-
fying the procedures and contents of such no-
tifications. These draft RTS also address the
requirement on resolution authorities to pub-
lish a notice summarising the effects of any
resolution action and in particular the effects
on retail customers.
Valuation
The BRRD provides a comprehensive frame-
work of powers for resolution authorities to in-
tervene in failing banks. To ensure authorities
exercise these powers in ways which reduce
the risk of costs falling on the taxpayer, pre-
serve value where possible, and respect the
property rights of affected shareholders and
creditors, the BRRD requires independent val-
uations to be carried out to inform the authori-
ties’ decisions. These valuations are required
for several distinct purposes, either prior to or
after the resolution.
Resolution
Failing or
likely to fail
Resolution tools
& powers
Valuation
Figure 7: Resolution sub stages