Featured Product

    ECA Recommends Actions to Enhance Resolution Planning for Banks

    January 20, 2021

    EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism. ECA has conducted a second audit to inform policymakers and legislators about the state of preparedness of the Single Resolution Mechanism. The auditors found that the Single Resolution Mechanism has made progress over the last years, but some key elements are missing and further steps are needed in resolution planning for banks. The review concludes that SRB should put in place all relevant policies shaping resolution actions and address weaknesses in the quality, timeliness, and consistency of its own resolution planning. Other essential issues, such as funding in resolution and harmonization of national insolvency proceedings for banks, also need to be resolved by the legislators.

    ECA has conducted this second audit to address the oversight of resolution plans of SRB for less significant banks and as a follow-up of the results of the previous audit. To that end, ECA examined whether the policy framework and organizational setup were appropriate and progress had been made in terms of the quality and timing of the resolution plans adopted. The audit work took place from April 2019 to January 2020. In its review, ECA found that the policies did not yet address all relevant areas or revealed weaknesses. The policies (with some exceptions) were not addressed to the national resolution authorities for banks under their remit until August 2020, but they could serve as a point of reference. 

    The report notes that the choice of resolution tool and its effectiveness depend, among other things, on whether the substantive impediments to a bank’s resolvability have been addressed or removed. Yet, the auditors observe that SRB has refrained from determining any such impediments to date, thus failing to comply with the harmonized rules. Also, the rules on burden-sharing vary according to whether a bank is resolved or receives State aid in the context of insolvency proceedings. To enhance the preparedness of the Single Resolution Mechanism, ECA has recommended SRB to:

    • Improve its set of policies that guide the resolution planning of Single Resolution Mechanism. SRB should establish the missing policies, resolve weaknesses in existing policies and/or their application, and require internal resolution teams to apply a comply-or-explain approach when deviating from the policies established in the resolution planning manual.
    • Ensure timely adoption and full compliance of resolution plans with legal requirements. In this regard, SRB should improve the quality of the plans to achieve full compliance with the Single Rulebook as well as streamline and address the time-consuming nature of procedures, in an effort to not compromise the objective of adopting all plans in a one-year cycle.
    • Improve the organizational setup of the Single Resolution Mechanism. To improve the oversight of resolution planning at the national resolution authority level, SRB should assign sufficient staff and express clear views on the quality of resolution plans for less significant banks, where it detects shortcomings.
    • Invite the legislators to set up objective and quantified criteria for timely supervisory action. SRB and EC should approach the legislators and ECB and advocate for objective and quantified thresholds for triggering early intervention measures and reaching the decision that a bank is failing or likely to fail.


    Related Links

    Keywords: Europe, EU, Banking, Resolution Planning, Resolution Framework, Single Resolution Mechanism, SRB, ECA

    Featured Experts
    Related Articles

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).

    September 26, 2022 WebPage Regulatory News

    EBA Launches EU-Wide Transparency Exercise in 2022

    The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.

    September 23, 2022 WebPage Regulatory News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."

    September 22, 2022 WebPage Regulatory News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.

    September 21, 2022 WebPage Regulatory News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8521