EBA Publishes Report on the Functioning of Resolution Colleges in EU
EBA published the first report on the functioning of resolution colleges. EBA monitored the activities of 13 colleges established for large cross-border banking groups. The report summarizes assessment of the quality of the colleges' organization, discussions held, and general output. Overall, the report finds that good progress has been achieved since the introduction of the Bank Recovery and Resolution Directive (BRRD) in 2015, also considering that most colleges are only in their second year of operation.
The report found that, in 2017, resolution authorities were broadly compliant with the regulations regarding the operational aspects of colleges. In particular, their level of engagement has progressively intensified and they have managed to meet most of the deadlines for reaching joint decisions. EBA stresses that the meetings of colleges are required to take place at least once a year, that resolution planning information should be properly circulated ahead of the meetings, and that minutes should be promptly shared with members after the meetings. The quality of the observed discussions has improved over the last two years, with noticeably greater contribution from host authorities. However, the report identifies that the quality varied between meetings and that additional progress is needed in some important areas, such as the interlinkages between recovery and resolution.
Also, the quality of college outputs has improved. In 2017, the college members discussed and reached joint decisions on resolution plans and resolvability assessments as well as on consolidated Minimum Requirement for Own Funds and Eligible Liabilities (MREL) for most of the colleges monitored. EBA also observed progress on the removal of impediments, with banks building up their levels of MREL-eligible debt as well as making progress in the inclusion of robust resolution clauses in their contracts for critical services. However, the report notes that resolution is a complex matter, which requires further progress and continued effort to ensure college members are well-prepared to deal with the failure of a cross-border bank. The report identifies the following key improvements:
- Most resolution plans need further improvement in some key operational aspect.
- Progress is needed in removing impediments to resolvability.
- MREL needs to be set at solo level to ensure an adequate distribution of loss-absorbing capacity within groups.
Related Links
Keywords: Europe, EU, Banking, BRRD, Resolution Colleges, MREL, EBA
Previous Article
SFC Circular on Margin Financing Activities Disguised as InvestmentsRelated Articles
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.
EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
FSB Sets Out Work Priorities for 2021
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU Publishes Corrigendum to Revised Capital Requirements Regulation
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs Issue Statement on Application of Sustainability Disclosures Rule
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC Consults on Crisis Management and Deposit Insurance Frameworks
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA Proposes Standards for Supervisory Cooperation Under IFD
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE Addresses Banks in Scope of First Resolvability Assessment
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.