EBA Calls on Resolution Authorities to Consider Impact of COVID Crisis
EBA published a statement on resolution planning in light of the COVID-19 pandemic. In the statement, EBA expresses its views regarding update of resolution plans, update of the minimum requirement for own funds and eligible liabilities (MREL) decisions, removal of impediments to resolvability, and activation of resolution colleges. EBA states that resolution authorities should take into account the impact of COVID-19 on banks and their business models when taking decisions on resolution plans and on MREL. In addition, resolution authorities should use and test resolution colleges as the main fora to exchange information and share decisions in these times of stress.
Through this statement, EBA aims to re-affirm that resolution planning is crucial in time of uncertainty to ensure that resolution is a credible option in case of failure. The focus of the statement is on ensuring that the current situation is effectively taken into account by resolution authorities while maintaining a through-the-cycle approach and ensuring that resolvability objectives are achieved. To the extent possible, resolution authorities should consider the impact of COVID-19 on potential credible recovery options and recovery plans, as those are being updated following a recent EBA statement on the topic. The use of updated information should not mean that public interest assessments and resolution plans should necessarily change to reflect COVID-19-related changes as those may be temporary. MREL decisions and their monitoring, to the extent possible, should reflect the most recent supervisory capital requirements while keeping in mind the fast approaching implementation of the Bank Recovery and Resolution Directive (BRRD2). In assessing whether to adjust their MREL decisions taking into account the most recent supervisory and balance sheet data, resolution authorities would need to consider the temporary nature of some data variations to adopt a through-the-cycle approach and prepare a smooth transition to BRRD2.
Related Links
Keywords: Europe, EU, Banking, Resolution Framework, COVID-19, MREL, Resolution Plans, Resolution Colleges, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
BCBS and FSB Set Out Recommendations for Benchmark TransitionRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards