Featured Product

    EBA Examines Application of Early Intervention Measures Under BRRD

    May 27, 2021

    EBA published a report on the application of early intervention measures under the Bank Recovery and Resolution Directive (BRRD). The report highlights the key challenges faced by supervisors in the application of the current regulatory framework on the early intervention measures and various options for addressing them. This report follows the discussion paper that was launched in June 2020 to explore ways of enhancing crisis management tools available for competent authorities, in addition to the well-established and widely used supervisory powers laid down in the Capital Requirements Directive (CRD) and in the Single Supervisory Mechanism Regulation (SSMR).

    The BRRD introduced early intervention measures to expand the existing set of powers available to supervisors when institutions are experiencing difficulties. EBA monitored the application of early intervention measures in 2015-2018 and observed their limited use across EU. Instead of resorting to early intervention measures, competent authorities often preferred to apply other pre-BRRD supervisory powers available to them. EBA investigated the reasons for these supervisory practices and, in June 2020, had published a discussion paper including its preliminary findings on the most important implementation issues in the area of early intervention measures and possible solutions on how to address them. The discussion paper on early intervention measures brought the key challenges in the implementation of the early intervention measures framework to the attention of the EU legislators and EC is currently working on revising the existing BRRD provisions on early intervention measures. The report that has been published now concludes the EBA work on early intervention measures and provides an overview of the feedback received from public consultations as well as the EBA conclusions.

    The report states that EBA observed supervisory consensus on the need to eliminate existing overlaps between early intervention measures and other supervisory powers as well as on the need to remove the formal sequencing of early intervention measures specified in Articles 27-29 of the BRRD. EBA also observed that competent authorities supported the importance of amending Article 27(1) of the BRRD, which includes an example of a quantitative early intervention trigger. For early intervention triggers specified in the regulatory technical standards (for example, based on the Supervisory Review and Evaluation Process, or SREP, scores or monitoring of key risk indicators), EBA will conduct further work and amend its current guidelines on the early intervention triggers, upon finalization of the ongoing review of the BRRD.

    EBA also concluded that it would be important to amend the existing Level 1 legislation that includes the example of the quantitative early intervention trigger of 1.5% above Pillar 1 capital. In its current form, it might lead to a situation where the early intervention trigger is met when institution’s capital is even below the level where competent authorities may already consider withdrawing its authorization. Moreover, the current hard trigger from Level 1 interferes with a process of setting institution‚Äźspecific early intervention thresholds for capital key risk indicators monitored by supervisors for early intervention purposes. Independently from the possible amendments of early intervention measures framework, the EBA guideline on recovery indicators, which are currently being reviewed, may clarify that in principle, institutions should be able to apply recovery options before supervisors use the early intervention measures.


    Related Links

    Keywords: Europe, EU, Banking, BRRD, CRD, Crisis Management Framework, Early Intervention Measures, SREP, SSM, Basel, Pillar 1, Regulatory Capital, EBA

    Featured Experts
    Related Articles

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582