EU published the finalized second Bank Recovery and Resolution Directive (BRRD II or Directive (EU) 2019/879) and the second Single Resolution Mechanism Regulation (SRMR II or Regulation (EU) 2019/877) in the Official Journal of the European Union. BRRD II amends BRRD (Directive 2014/59/EU) while SRMR II amends SRMR (Regulation No 806/2014) regarding the loss-absorbing and recapitalization capacity of credit institutions and investment firms. Both BRRD II and SRMR II shall enter into force on the twentieth day following that of their publication in the Official Journal of the European Union. BRRD II states that member states shall apply the transposed measures no later than December 28, 2020 (with certain exceptions) while SRMR II shall also apply from December 28, 2020.
SRMR II relates to implementation of the Total Loss-Absorbing Capacity (TLAC) standard in EU law, which needs to take into account the existing institution-specific minimum requirement for own funds and eligible liabilities (MREL) that applies to all credit institutions and investment firms established in EU as well as to any other entity as laid down in BRRD. As the TLAC standard and the MREL pursue the same objective of ensuring that institutions and entities established in EU have sufficient loss-absorbing and recapitalization capacity, the two requirements should be complementary elements of a common framework. Operationally, the harmonized minimum level of the TLAC standard for global systemically important institutions, or G-SIIs is being introduced in EU legislation through amendments to the Capital Requirements Regulation, while the institution-specific add-on for G-SIIs and the institution-specific requirement for non-G-SIIs, referred to as the MREL, is being addressed through targeted amendments to BRRD and SRMR. SRMR II, which amends SRMR on the loss-absorbing and recapitalization capacity of institutions and entities, should be applied in a manner consistent with that in the Capital Requirements Regulation and in the fourth Capital Requirements Directive (CRD IV) and the BRRD.
SRMR II shall apply from December 20, 2020 while Article of BRRD II titled "Transposition" specifies that the member states shall bring into force the laws, regulations, and administrative provisions necessary to comply with BRRD II by December 28, 2020. They shall forthwith communicate to EC the text of the measures. Member states shall apply the measures as from the date of their entry into force in national law, which shall be no later than December 28, 2020. Member states shall apply point (17) of Article 1 of BRRD II, as regards Article 45i(3) of BRRD from January 01, 2024. Where, in accordance with Article 45m(1) of BRRD, the resolution authority has set a compliance deadline that ends after January 01, 2024, the application date of point (17) of Article 1 of BRRD II as regards Article 45i(3) of BRRD shall be the same as the compliance deadline. When member states adopt the measures referred to in paragraph 1, they shall contain a reference to BRRD II or be accompanied by such a reference on the occasion of their official publication. Member states shall determine how such a reference is to be made. Member states shall communicate to EC and to EBA the text of the main provisions of national law which they adopt in the field covered by BRRD II.
Effective Date: June 27, 2019
Keywords: Europe, EU, Banking, SRMR II, BRRD II, TLAC, MREL, G-SII, Systemic Risk, SRM, Recovery and Resolution, European Council, European Parliament
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
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