June 13, 2018

European Parliament published a research paper that discusses, from a legal perspective, the challenges and difficulties involved in the production of the valuation reports required by the Bank Recovery and Resolution Directive (BRRD). The study analyzes various types of valuations under BRRD following the classification conducted by EBA in its regulatory technical standards: Valuation 1 (decision on the resolution), Valuation 2 (determination of the tools), and Valuation 3 (adherence to the "no creditor worse-off" principle). It also examines the concept of provisional and ex-post definitive valuations.

In practice, it is difficult to prepare a valuation and adopt the resolution of a complex-structured institution over a short period of time. The paper considers the option of a moratorium tool for use by the resolution authorities as a possible way forward, which could address the concerns about timing and flexibility in the valuation process. Given the discretionary powers of the resolution authorities and the need for Single Resolution Board (SRB) independence, the paper also considers the wider issues of legitimacy and accountability in the actions and decisions taken by SRB, in light of the unique and complex institutional structure of the Single Resolution Mechanism. 

 

Related Link: Research Paper (PDF)

Keywords: Europe, EU, Banking, BRRD, Valuation Reports, Resolution Planning, SRB, Moratorium Tool, European Parliament