Featured Product

    EBA Examines Application of Early Intervention Measures Under BRRD

    May 27, 2021

    EBA published a report on the application of early intervention measures under the Bank Recovery and Resolution Directive (BRRD). The report highlights the key challenges faced by supervisors in the application of the current regulatory framework on the early intervention measures and various options for addressing them. This report follows the discussion paper that was launched in June 2020 to explore ways of enhancing crisis management tools available for competent authorities, in addition to the well-established and widely used supervisory powers laid down in the Capital Requirements Directive (CRD) and in the Single Supervisory Mechanism Regulation (SSMR).

    The BRRD introduced early intervention measures to expand the existing set of powers available to supervisors when institutions are experiencing difficulties. EBA monitored the application of early intervention measures in 2015-2018 and observed their limited use across EU. Instead of resorting to early intervention measures, competent authorities often preferred to apply other pre-BRRD supervisory powers available to them. EBA investigated the reasons for these supervisory practices and, in June 2020, had published a discussion paper including its preliminary findings on the most important implementation issues in the area of early intervention measures and possible solutions on how to address them. The discussion paper on early intervention measures brought the key challenges in the implementation of the early intervention measures framework to the attention of the EU legislators and EC is currently working on revising the existing BRRD provisions on early intervention measures. The report that has been published now concludes the EBA work on early intervention measures and provides an overview of the feedback received from public consultations as well as the EBA conclusions.

    The report states that EBA observed supervisory consensus on the need to eliminate existing overlaps between early intervention measures and other supervisory powers as well as on the need to remove the formal sequencing of early intervention measures specified in Articles 27-29 of the BRRD. EBA also observed that competent authorities supported the importance of amending Article 27(1) of the BRRD, which includes an example of a quantitative early intervention trigger. For early intervention triggers specified in the regulatory technical standards (for example, based on the Supervisory Review and Evaluation Process, or SREP, scores or monitoring of key risk indicators), EBA will conduct further work and amend its current guidelines on the early intervention triggers, upon finalization of the ongoing review of the BRRD.

    EBA also concluded that it would be important to amend the existing Level 1 legislation that includes the example of the quantitative early intervention trigger of 1.5% above Pillar 1 capital. In its current form, it might lead to a situation where the early intervention trigger is met when institution’s capital is even below the level where competent authorities may already consider withdrawing its authorization. Moreover, the current hard trigger from Level 1 interferes with a process of setting institution‐specific early intervention thresholds for capital key risk indicators monitored by supervisors for early intervention purposes. Independently from the possible amendments of early intervention measures framework, the EBA guideline on recovery indicators, which are currently being reviewed, may clarify that in principle, institutions should be able to apply recovery options before supervisors use the early intervention measures.


    Related Links

    Keywords: Europe, EU, Banking, BRRD, CRD, Crisis Management Framework, Early Intervention Measures, SREP, SSM, Basel, Pillar 1, Regulatory Capital, EBA

    Featured Experts
    Related Articles

    CFPB Finalizes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.

    March 30, 2023 WebPage Regulatory News

    BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023

    The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.

    March 23, 2023 WebPage Regulatory News

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    US Congress Report Examines Data Privacy and Cybersecurity Regulations

    The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    EU to Conduct One-Off Scenario Analysis to Assess Transition Risk

    The European authorities recently made multiple announcements that impact the banking sector.

    March 10, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8810