Central Bank of Ireland Publishes Its Approach to Resolution

By Regulatory News

May 30, 2019

Basel III, Regulatory Capital

The Central Bank of Ireland published its approach to resolution for less significant banks and investment firms in Ireland. In this context, the bank also conducted its third Resolution Industry Briefing on May 30, 2019. The presentation from the event outlines the strategic plan of the central bank for 2019-2021, including the roadmap to implementing its approach to resolution for the less significant banks and certain investment firms. As per the briefing, over the next few years, the focus will be on strengthening resolvability of institutions, developing the resolution policy framework, and improving operational preparedness.

The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

Related Links

Effective Date: June 18, 2019

Press Release

Proposed Rule 1

Proposed Rule 2

Proposed Rule 3

Presentation on Regulatory Framework (PDF)

Presentation on Resolution Plan Rules (PDF)

The key topics covered in the event included strengthening of resilience, the approach to resolution, valuation in resolution, the risk-reduction measures package, the revised prudential regime for investment firms, and the elements of Banking Union with respect to resolution. The briefing provides an overview of the national implementation of the risk-reduction measures package, along with its objectives and timeline. The risk-reduction measures package covers Capital Requirements Regulation (CRR) 2, Capital Requirements Directive (CRD) 5, Bank Recovery and Resolution Directive (BRRD) 2, and Single Resolution Mechanism Regulation (SRMR) 2. The briefing highlighted that the key areas of focus over the next few years include the following:

Strengthen resolvability of institutions, by developing resolution plans, (where relevant) setting minimum requirement for own funds and eligible liabilities (MREL) requirements, and removing identified barriers to resolution
Develop the resolution policy framework, making the approach to resolution more effective, more transparent, and better understood
Improve operational preparedness, including by designing and conducting simulation exercises under different scenarios
Be an effective and trusted member of the Single Resolution Mechanism and work closely with the Single Resolution Board for firms within their remit

Related Links

Keywords: Europe, Ireland, Banking, Resolution, CRR2, CRD 5, SRMR 2, BRRD 2, MREL, Less Significant Institutions, Banking Union, Central Bank of Ireland

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Central Bank of Ireland Publishes Its Approach to Resolution

By Regulatory News

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