The European Banking Authority (EBA) published its annual report on resolution colleges for 2020. The report sets out observations on the functioning of colleges during the year and the progress achieved in key areas of resolution planning. Reflecting on the effects of moving to a virtual format of discussion amid pandemic, the report notes that the enforced change was broadly successful and reflected well on the contingency planning measures. However, the report also highlights the improvements needed to ensure that information exchange and coordination between members remain robust.
The report, which has been issued in accordance with the EBA obligations under Article 88(4) of the Bank Recovery and Resolution Directive (BRRD), covers colleges that took place in the 2020 planning cycle. Colleges across EU were required by the pandemic to change from the traditional format of physical meetings to a virtual format. Overall, this was considered to have occurred in a relatively seamless fashion, although meetings were observed to be shorter, less interactive, and more challenging than before. The role of colleges in the joint decision-making process generally functioned well with decisions being taken within the prescribed timelines. Discussions in colleges continued to focus on operational aspects of resolution plans. There was no evidence of an acceleration or reprioritization of actions or consideration of alternative resolution strategies in response to the pandemic. However, progress in some areas of resolution planning was less than anticipated, as banks’ resources were devoted to responding to the day-to-day effects of the pandemic. EBA also noted that the proposals made in the 2019 report for increased engagement with competent ministries and administrators of deposit guarantee schemes did not generate detailed discussion.
For the 2021 cycle of resolution college meetings, EBA intends to continue to monitor the same issues as set out in the 2019 report. One area of recommended focus by EBA in the resolution colleges annual report 2019 involved greater engagement with college members from both competent ministries and administrators of deposit guarantee scheme. While it was observed that group-level resolution authorities invited these members to engage and set out their positions and expectations from resolution plans, in most cases this did not generate detailed discussion. Therefore, in the opinion of EBA, this component of the planning process should be addressed through targeted questions about the role of these bodies in the planning process. The questions should focus on the expectations of the bodies from the plan, information exchange and coordination of communications on the execution of the plan, or related actions available under the BRRD. Other focus areas involve:
- Credibility and feasibility of the preferred resolution strategy in the current environment and the analysis of alternative resolution strategies
- Extent to which supervisory authorities, finance ministries and administrators of deposit guarantee schemes are actively involved in consideration of their respective roles
- Analysis of the suitability of written arrangements underpinning colleges
- Extent to which colleges undertake reviews of Business Reorganization Plans to assess if changes are required in response to the economic effects of COVID-19 crisis
Additionally, the EBA’s resolvability template, which introduced via the 2019 report, was used in colleges and received a positive response from attendees. However, as it was being used for the first time, the process gave rise to a number of queries with respect to completion and these will be addressed by the EBA in advance of the next round of meetings. The most notable observation from this initial exercise centered on the target date for completion of actions. In a number of cases, these targets were non-specific with respect to the objectives and timeline.
Keywords: Europe, EU, Banking, Resolution Colleges, COVID-19, BRRD, Resolution Planning, Bail In, Resolution Framework, EBA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleCSSF Updates Frequently Asked Questions on COVID Measures
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.
The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.
The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)
The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).
The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications