ECB Considers Guarantee Framework for Banks Coming Out of Resolution
ECB has compared the frameworks for liquidity provision under the bank resolution framework across jurisdictions and presented lessons learned from different frameworks for liquidity provision post-resolution. In conclusion, ECB is investigating the development of a guarantee framework, in the Banking Union, to allow banks coming out of resolution with limited collateral to access Eurosystem. It is expected that such public guarantees would protect the Eurosystem against losses, foster a single market for banks in the Banking Union, reduce the bank-sovereign nexus, and make the resolution framework of the Banking Union more credible. In another development, the ECB Governing Council adopted a revised version of the agreement on emergency liquidity assistance (ELA).
The updated version of the agreement on ELA contains a technical amendment to Section 3.2(a)(i) to clarify that solvency assessments of financial institutions are performed by the prudential supervisor in accordance with the solvency definition for ELA purposes, as laid down in Section 4. ECB also specifies that the ELA agreement will be reviewed in the course of 2023. As per the ELA agreement, a credit institution is considered solvent for ELA purposes if:
- Its Common Equity Tier (CET)1, Tier 1, and Total Capital Ratio as reported under the Capital Requirements Regulation (CRR) on an individual (if applicable) and consolidated (if applicable) basis comply with the harmonized minimum regulatory capital levels (namely 4.5%, 6% or 8%, respectively); or
- There is a credible prospect of recapitalization—in case the above condition is not met, by which harmonized minimum regulatory capital levels would be restored within 24 weeks after the end of the reference quarter of the data that showed that the bank does not comply with harmonized regulatory minimum standards; in duly justified, exceptional cases, the Governing Council may decide to prolong the grace period of 24 weeks.
Related Links
Keywords: Europe, EU, Banking, ELA, CRR, Regulatory Capital, Basel, Resolution Framework, Guarantee Framework, ECB
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.