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. EBA is also seeking comments, until September 08, 2022, on the draft regulatory technical standards on the identification of a group of connected clients (GCC), under the Capital Requirements Regulation (CRR).
The guidelines for resolution authorities, as expected under the Bank Resolution and Recovery Directive (BRRD/2014/59/EU2), provide a clear framework for resolution authorities to publish their approach to using the bail-in tool; they are intended to ensure that a minimum level of harmonized information is made public on the mechanics underpinning the execution of the bail-in tool. The aim of the guidelines is to increase predictability and enable resolution authorities to set-out their favored approach on exchange mechanic specifying whether they intend to make use of interim instruments or not, an indicative timeline for the application of the exchange mechanic, and how potential valuation adjustments would take place. Resolution authorities that have not yet published their bail-in mechanic are expected to start publishing a high-level document from January 2024 setting out the key aspects of their preferred approach. The authorities should also indicate whether they intend to make use of interim instruments. Resolution authorities that have already published such information are expected to check if their publication complies with the EBA draft Guidelines on improving resolvability for institutions and resolution authorities. Post this consultation, the final report is expected to be published by the end of 2022. International standards on resolution expect home authorities to publish their approach to the exchange mechanic—that is, the operational process allowing the write-down of capital instruments or bail-in-able liabilities or conversion into new shares.
The proposed regulatory standards on the identification of the group of connected clients revise and partially replace the EBA guidelines (EBA/GL/2017/15) on connected clients under Article 4 of the CRR Regulation (575/2013). The objective of the definition of a group of connected clients in CRR is to identify two or more natural or legal persons who are so closely linked by idiosyncratic risk factors, that it is prudent to treat them as a single risk. The guidelines are intended to set out clear circumstances where interconnections by means of a control and/or an economic dependency relationship lead to a single risk and thus a grouping requirement. The draft standards also set out rebuttable provisions for the assessment of situations where control and economic dependencies coexist and thus one overall group of connected clients, as opposed to two or more separate groups of connected clients, needs to be formed. Following the submission to the European Commission, the final draft regulatory technical standards will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union
- Press Release on Resolvability Guidelines
- Consultation Paper on Resolvability Guidelines (PDF)
- Press Release on Group of Connected Clients
- Consultation on Group of Connected Clients (PDF)
- Guidelines on Connected Clients
Keywords: Europe, EU, Banking, Resolution Framework, Bank Resolvability, Transferability in Resolution, BRRD, CRR, Basel, Connected Clients, Large Exposures, Regulatory Technical Standards, EBA
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