EBA provided guidelines on resolvability and opened a consultation on transfer tools
On 13 January 2022, the European Banking Authority (EBA) published Guidelines with a view to improving the resolvability of institutions within the scope of resolution tools. The Guidelines cover actions required from both institutions and authorities to improve the resolvability of institutions proactively. The institutions must meet the resolvability expectations by 1 January 2024.
The EBA Guidelines are part of the legal framework at the level of the European Union. They combine and implement existing international standards and best practices developed by European resolution authorities. There was a public consultation on the Guidelines, which ended in June 2021.
The Single Resolution Board (SRB) has also presented its expectations on the resolvability of institutions in its “Expectations for Banks” document, which is mainly consistent in terms of substance with the EBA Guidelines. ”Expectations for Banks” is the primary policy guideline on resolvability for the Financial Stability Authority (FFSA) concerning the LSIs under its remit. However, the FFSA will also take into account the present EBA Guidelines in its communication with institutions, in particular as regards aspects involving relevant differences between the EBA guidelines and the SRB document.
The FFSA provides guidelines to LSIs on resolvability expectations and assesses the development of resolvability as part of resolution planning. If the FFSA finds that an institution as not made adequate progress, it will take actions potentially including an official procedure to remove impediments to resolvability.
The Guidelines will be complemented as regards strategies concerning transfer strategies
In connection with the publication of the Guidelines, the EBA opened a consultation pertaining to transfer strategies. These refer to resolution strategies where an institution's shares and other participating interests or assets and liabilities are transferred to a third party in the context of resolution. The Guidelines subject to the consultation focus on transferability and, in particular, the definition of the transfer perimeter, its separability from other functions and the planning of the implementation of the transfer of the business itself. Some of the expectations are addressed to institutions and some to resolution authorities.
The SRB has published its expectations concerning transfer strategies as part of the “Expectations for Banks” document (Chapter 2.7. Separability and restructuring) and in supporting operational guidance documents. As in the area of resolvability, the FFSA will apply these Guidelines as its primary resource concerning LSIs. The FFSA will provide additional guidance to LSIs on this subject.
The EBA consultation ended on 15 April 2022. The expectations related to transfer strategies must be met as part of the resolvability framework, that is, by 1 January 2024.
The abovementioned EBA Guidelines are intended to be updated and complemented as the resolvability framework evolves both internationally and at the European Union level. At present, the EBA is working on additional guidance on the disclosure of the bail-in mechanism and other resolution-related information as well as on dry runs concerning resolvability.
The Guidelines and consultation on the EBA website: EBA publishes Guidelines for institutions and resolution authorities on improving banks’ resolvability and consults on transferability
Further information: Anni-Mari Karvinen, Bank Resolution Expert (firstname.lastname(at)rvv.fi)