Featured Product

    EBA Examines Use of Proportionality Principle for Resolution Planning

    December 22, 2020

    EBA published its second report on the application of simplified obligations and waivers under the Bank Recovery and Resolution Directive (BRRD) across EU. The report presents the results of EBA monitoring on how competent and resolution authorities applied the principle of proportionality for recovery and resolution planning in their respective jurisdictions and describes the current level of convergence in this area. EBA has observed an increase in the number of authorities applying simplified obligations for less significant banks, especially for resolution planning purposes. Also, the convergence was higher when assessing which institutions are eligible for simplified obligations. However, significant divergences remained in determining reduced requirements for institutions benefiting from simplified regimes, where the regulatory framework does not provide detailed guidance.

    The report highlights that compared with the 2017 monitoring exercise, more competent and resolution authorities decided to apply simplified obligations to credit institutions in 2019. For recovery planning, the number of authorities applying simplified obligations has risen from 18 to 21, whereas for resolution planning the number has almost doubled (increasing from 13 jurisdictions to 25 jurisdictions). With regard to investment firms, the number of authorities granting simplified obligations since 2017 remained stable for recovery planning (15 competent authorities) and slightly increased for resolution planning (from 9 resolution authorities to 13 resolution authorities). The number of authorities granting simplified obligations to investment firms was lower than that granting simplified obligations to credit institutions, mostly because in some EU jurisdictions there were no investment firms under the scope of BRRD and, thus, none was subject to any recovery or resolution planning requirements.

    The proportion of credit institutions under simplified obligations in particular jurisdictions varied, although the highest was typically observed in member states with the largest number of banks in Europe. Just a few EU authorities granted waivers to credit institutions, as this is allowed only in those jurisdictions with specific regulatory frameworks for institutional protection schemes  and credit institutions affiliated to central bodies. The report also highlighted a significantly improved level of harmonization in the simplified obligations eligibility assessment methodologies applied by competent and resolution authorities compared to 2017. This was mainly driven by the application of the EBA regulatory technical standards specifying the conditions for applying simplified obligations that replaced the guidelines previously issued on the same topic. EBA also observed significant differences in the determination by the authorities of the reduced level of BRRD requirements for recovery and resolution plans. Divergent practices have been applied in relation to all possible areas in which such reductions could be introduced by the authorities (that is, a deadline for preparing the first simplified plans, the frequency of updating the plans, content of the simplified plans, information required from institutions, and the simplified resolvability assessment), as the regulatory framework does not provide detailed guidance for these aspects.

    As part of the EU legislation, BRRD introduces an obligation to prepare and maintain recovery and resolution plans, which in principle is applicable to all credit institutions and certain investment firms. However, the framework also gives competent and resolution authorities the opportunity to grant simplified obligations and waivers to institutions under their jurisdiction, provided that the institutions concerned fulfil specific eligibility criteria.


    Related Links

    Keywords: Europe, EU, Banking, BRRD, Proportionality, Simplifies Obligations, Recovery and Resolution Planning, Resolution Framework, Supervisory Convergence, Less Significant Institutions, EBA

    Related Articles

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    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.

    June 21, 2022 WebPage Regulatory News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    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.

    June 16, 2022 WebPage Regulatory News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    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.

    June 15, 2022 WebPage Regulatory News

    BaFin Consults on Resolvability Requirements for Resolution Planning

    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.

    June 10, 2022 WebPage Regulatory News

    EBA Consults on Certain Standards and Guidelines Under CRR and BRRD

    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.

    June 08, 2022 WebPage Regulatory News

    OJK Publishes Regulatory Updates for Financial Sector Entities

    The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)

    June 03, 2022 WebPage Regulatory News

    EU Publishes Rules on DLT and Data Governance

    The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).

    June 03, 2022 WebPage Regulatory News

    EBA Publishes Phase 2 of Reporting Framework 3.2

    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

    June 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8267