EC Approves Orderly Liquidation and Guarantee Scheme for Italian Banks
Under the EU state aid rules, EC has authorized an orderly liquidation scheme for small banks in Italy for 12 months as well as a liquidity support scheme to grant guarantees to banks in Italy with the aim of supporting them in case of need. The liquidity support scheme will allow the Italian State to grant guarantees on newly issued liabilities and on Emergency Liquidity Assistance (ELA) from the central bank, for up to a total nominal amount of EUR 19 billion. Only viable Italian banks, as defined by the competent supervisor, with temporary liquidity issues will have access to the measure. The liquidity support measure will be valid until May 20, 2021.
EC has authorized under EU state aid rules an Italian liquidation scheme for small banks (other than cooperatives) with total assets of less than EUR 5 billion. The authorization has been granted for 12 months from November 20, 2020. The scheme facilitates the work of the Italian authorities when the competent national authorities have found an eligible bank to be failing, have concluded that the resolution of the bank was not in the public interest, and consequently put the bank into compulsory administrative liquidation. When assessing the public interest the authorities must ensure that the compulsory administrative liquidation achieves the resolution objectives to the same extent as resolution. Under the scheme, the Italian state will be able support the sale of assets and liabilities of a failed bank to another bank. The buyer will be selected on the basis of a competitive bidding process and should viably integrate the acquired activities within one year. The shareholders and subordinated creditors of the failed banks will have to contribute to cover the losses, thus helping to minimize the need for aid.
EC found that the Italian measure is in line with the conditions set out in the 2013 Banking Communication for orderly liquidation schemes for small banks, with the exception of the EUR 3 billion balance sheet threshold. In this respect, the Italian scheme will be available to small banks (other than cooperatives) with total assets of less than EUR 5 billion. However, given the exceptional circumstances linked to the coronavirus outbreak and the safeguards against undue competition distortions that Italy has included in the scheme, EC has accepted the higher threshold of EUR 5 billion. EC will also temporarily accept that higher thresholds for similar schemes are applied by other Member States in the context of the coronavirus outbreak, as long as similar safeguards to those implemented by Italy can be demonstrated.
Related Links
Keywords: Europe, EU, Italy, Banking, State Aid Rules, Emergency Liquidity Assistance, Loan Guarantee, Orderly Resolution, Small Banks, Resolution Framework, EC
Previous Article
BoE Encourages Submission of Branch Returns on BEEDS PortalRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BaFin Consults on Resolvability Requirements for Resolution Planning
The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.
EBA Consults on Certain Standards and Guidelines Under CRR and BRRD
The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.
OJK Publishes Regulatory Updates for Financial Sector Entities
The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)
EU Publishes Rules on DLT and Data Governance
The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).
EBA Publishes Phase 2 of Reporting Framework 3.2
The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications