SRB Chair on Resolution Framework Priorities for Next EU Legislature
The SRB Chair Elke König published an article that outlines the potential resolution framework priorities for the next EU legislature, just as the mandate of the current European Commission and Parliament draws to an end. This article was published in The Eurofi Magazine.
In the article, she mentions that, from the perspective of SRB, the finalization of the Banking Package represents a milestone in strengthening the resolution framework. The partial harmonization of the creditor hierarchy was another step forward. Building on these achievements, SRB is hopeful that the next legislature will deliver on the implementation, review, and completion of the resolution framework. She then outlined the issues that legislators in the next mandate could address to the complete framework:
- Addressing asymmetries between the EU resolution regime and national insolvency frameworks
- Aligning the conditions to determine that a bank is "failing or likely to fail" with the criteria for liquidation at national level
- Addressing the issue of the requirements for burden sharing under the 2013 Banking Communication of EC, which apply in cases of precautionary recapitalization and liquidation aid, not being entirely in line with those for bail-in under the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR), potentially giving wrong incentives when compared to resolution
- Fully harmonizing the ranking of creditors in insolvency, as Directive 2017/2399 focused only on unsecured debt instruments in the hierarchy, while national differences remain on the ranking of the rest of the creditors
She highlighted that deepening the Economic and Monetary Union in EU requires the completion of the Banking Union and of the Capital Markets Union. A common framework for banks’ insolvency would constitute a significant advance on both paths. Both strong Banking Union and European capital market can play an important role in the creation of the needed liquidity for capital instruments and Minimum Requirement for own funds and Eligible Liabilities (MREL). Therefore, work on these must continue to progress in the new EU legislature.
Related Link: Article by SRB Chair
Keywords: Europe, EU, Banking, BRRD, SRMR, Directive 2017/2399, MREL, Resolution Framework, Creditor Hierarchy, Banking Union, SRB
Related Articles
MAS Concludes Blockchain Payments Prototype Shows Commercial Potential
MAS and Temasek jointly released a report to mark the successful conclusion of the fifth and final phase of Project Ubin, which focused on building a blockchain-based multi-currency payments network prototype.
EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.10
EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.
APRA Updates Reporting Validation Rules in July 2020
APRA updated the lists of the Direct to APRA (D2A) validation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
PRA to Partly Apply EBA Guidelines on Disclosures for COVID Measures
PRA updated the statement that provides guidance to regulated firms on implementation of the EBA guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.
EBA Updates List of Correlated Currencies Under CRR
EBA updated the 2019 list of closely correlated currencies that was originally published in December 2013.
FASB Proposes to Delay Implementation of Insurance Contracts Standard
FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).
APRA Updates Regulatory Approach to Loan Deferrals Amid COVID Crisis
APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.
BCBS and FSB Set Out Recommendations for Benchmark Transition
BCBS and FSB published a report on supervisory issues associated with benchmark transition.
IAIS Sets Out Recommendations for Benchmark Transition for Insurers
IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.
ESMA Updates Reporting Manual on European Single Electronic Format
ESMA updated the reporting manual on the European Single Electronic Format (ESEF).
