April 30, 2019

EC adopted a report that reviews the application of Bank Recovery and Resolution Directive (BRRD) and Single Resolution Mechanism Regulation (SRMR) in EU. These legal acts are key elements of the legislation that was adopted in the wake of the financial crisis and constitute the core building blocks of the Banking Union. Given that the two legislative instruments have thus far have been applied in a limited number of cases, the report concludes that more time is needed for their assessment before any amendments are proposed.

In its assessment, EC took stock of the implementation of the resolution legislation and its application to concrete banking cases. The legislation has been applied only in a very limited number of cases, out of which only one case concerned the resolution of an institution under SRMR. A number of these cases dealt with “legacy issues,” which accumulated during the financial crisis or before. Moreover, the provisions of the bail-in tool and the establishment of the Single Resolution Board became applicable only as of January 01, 2016. Additionally, other elements—such as resolution planning for larger and complex institutions and the provisions concerning MREL—require a phasing in to be fully implemented. Not to mention that certain crucial parts of the framework—including the provisions on Minimum Requirement for own funds and eligible Liabilities (MREL), moratorium powers, and the recognition of liabilities governed by third-country law—are still in the process of being amended and, once in place, transition periods will apply. After considering all these factors, the report concludes that more time is needed to fully assess the implications of the legislation. 

EC will, however, continue to monitor the application of the resolution framework and further assess the identified issues. EC will also engage in a comprehensive discussion of the topics identified in this report with respect to BRRD and SRMR (as well as issues that may emerge from application of the resolution framework) with experts appointed by the European Parliament, member states, and all relevant stakeholders. This report has been prepared in accordance with the Article 129 of BRRD and Article 94 of SRMR, which require EC to review the application of the resolution framework and to submit a report to the European Parliament and the Council. The reports on the application of these legal instruments were due by June and December 2018, respectively. Due to the close links between these instruments, it was though to be appropriate to conduct a joint review for BRRD and SRMR. 

 

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Keywords: Europe, EU, Banking, BRRD, SRMR, MREL, Banking Union, Resolution Framework, SRB, EC

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