Filenews 17 January 2022 - by Theano Thiopoulou
The final guidelines for institutions and resolution authorities on improving banks' resolvability were published last week by the European Banking Authority.
The guidelines, according to the EBA, represent an important step in complementing the EU legal framework in the area of resolution based on international standards and leveraging best practices. The EBA presented the consultation document on guidelines for institutions and resolution authorities on the portability of parts of a bank or the whole bank in the context of resolution. The consultation is expected to run until 15 April 2022. Institutions and authorities should fully comply with the guidelines by 1 January 2024.
Compliance will not necessarily amount to resolution, as this remains to be determined by the competent resolution authorities. On the contrary, these guidelines should be seen as the minimum steps that the institutions should take. The Directives concern the definition of the transfer perimeter, the possibility of separation (i.e. how to facilitate the separation of an entity or an undertaking from the rest of the group during the resolution) and the operational transfer of that perimeter.
The resolution and transferability guidelines will be updated and complemented as progress is made on relevant policy issues, both at international and EU level. In particular, the EBA is working on guidelines on bail-in issues and other possibilities. Inter alia, it is noted that the management body of institutions should ensure that an institution complies with the guidelines for the purposes of resolution planning and an executive director within the meaning of Article 91 of Directive 2013/36 should be designated as the competent person to ensure the accurate and timely provision of information for the preparation of the institution's resolution plan. In the case of an entity of a group established in a third country, the executive director should ensure the employment of staff with knowledge of local conditions.
According to the new guidelines, the institutions will have to appoint an experienced senior executive to be responsible for the implementation, management and coordination of (internal) planning/ resolution sociability and work programme. The experienced senior management should coordinate and manage resolution activities, including the preparation of questionnaires and other requests to the resolution authority. A liquidity analysis should also be carried out. Banking institutions should identify the currencies they consider important and be reported in detail. Also, the 'resolution weekend' is the phase (preferably takes place when markets are closed, as the name suggests) starting with determining that an entity is failing or is likely to fail and includes all the internal procedures required for the approval of the resolution system by the competent authority.
Institutions have one month from the implementation of the bail-in tool to prepare a business reorganisation plan for the approval of the resolution authority. Once the resolution actions have been carried out, the authorities must assess whether the affected shareholders and creditors would be treated better if the institutions instead entered into normal insolvency proceedings. This assessment will be made by another independent valuation, which allows the resolution authority to decide whether or not the affected shareholders and creditors are entitled to any compensation.
