EBA Publishes Report on the Functioning of Resolution Colleges in EU
EBA published the first report on the functioning of resolution colleges. EBA monitored the activities of 13 colleges established for large cross-border banking groups. The report summarizes assessment of the quality of the colleges' organization, discussions held, and general output. Overall, the report finds that good progress has been achieved since the introduction of the Bank Recovery and Resolution Directive (BRRD) in 2015, also considering that most colleges are only in their second year of operation.
The report found that, in 2017, resolution authorities were broadly compliant with the regulations regarding the operational aspects of colleges. In particular, their level of engagement has progressively intensified and they have managed to meet most of the deadlines for reaching joint decisions. EBA stresses that the meetings of colleges are required to take place at least once a year, that resolution planning information should be properly circulated ahead of the meetings, and that minutes should be promptly shared with members after the meetings. The quality of the observed discussions has improved over the last two years, with noticeably greater contribution from host authorities. However, the report identifies that the quality varied between meetings and that additional progress is needed in some important areas, such as the interlinkages between recovery and resolution.
Also, the quality of college outputs has improved. In 2017, the college members discussed and reached joint decisions on resolution plans and resolvability assessments as well as on consolidated Minimum Requirement for Own Funds and Eligible Liabilities (MREL) for most of the colleges monitored. EBA also observed progress on the removal of impediments, with banks building up their levels of MREL-eligible debt as well as making progress in the inclusion of robust resolution clauses in their contracts for critical services. However, the report notes that resolution is a complex matter, which requires further progress and continued effort to ensure college members are well-prepared to deal with the failure of a cross-border bank. The report identifies the following key improvements:
- Most resolution plans need further improvement in some key operational aspect.
- Progress is needed in removing impediments to resolvability.
- MREL needs to be set at solo level to ensure an adequate distribution of loss-absorbing capacity within groups.
Related Links
Keywords: Europe, EU, Banking, BRRD, Resolution Colleges, MREL, EBA
Related Articles
PRA Publishes Q&A on Property Valuation Requirements Under CRR
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
IOSCO Consults on Outsourcing Principles for Operational Resilience
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS Consortium to Develop AI Fairness Metrics for Credit Scoring
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE Updates Definitions for BTL Data Collection
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI Examines Financial Stability Implications of Payment Deferrals
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
PRA Finalizes Policy on Prudent Person Principle Under Solvency II
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA on Extending Large Exposure Limits for French Systemic Banks
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
ECB Highlights NPL Resolution as Key Policy Issue in Post-COVID Europe
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ Publishes Financial Stability Report for May 2020
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB Updates Guidance on Reporting of Securities Holdings Statistics
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).
