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
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Previous Article
BCBS and FSB Set Out Recommendations for Benchmark TransitionRelated Articles
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB Publishes Guide for Determining Penalties for Regulatory Breaches
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS Sets Out Good Practices to Manage Operational Risks Amid COVID
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR Announces New Data Collection Application for Banks and Insurers
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB Publishes Overview of Resolution Tools Available in Banking Union
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
