The SRM Regulation:

How to Make Cross-border Resolution Effective

Dr. Axel Kunde, Head of Unit Resolution Planning and Decisions

Single Resolution Board

2. Allocation of tasks within the SRM from 2016

Index

3. SRM Governance: approval of resolution plans

1. Resolution framework in the EU and the SRM

BRRD is a significant step (…) However, the Directive only establishes minimum harmonisation rules and does not lead to centralisation of decision making …

Bank Recovery and Resolution Directive

transposed in all 28 EU Member States

Resolution framework in the EU

Resolution tools

Recovery and resolution plans

Trigger for resolution

Government stabilization tools

Scope and institutional framework

Resolution Fund

Cross Border Agreements

Content of the BRRD

SRB constitution

• BBRD: Directive 2014/59/EU for the recovery and resolution of credit institutions

• SRMR: Regulation (EU) No 806/2014

For participating Member States, in the context of the Single Resolution Mechanism (SRM), a centralised power of resolution is established and entrusted to the Single Resolution Board established in accordance with this Regulation and to the national resolution authorities. That establishment is an integral part of the process of harmonisation in the field of resolution operated by Directive 2014/59/EU … (SRMR)

Regulation to create the Single Resolution

Mechanism adopted by 19 Member States

of the Euro area (but open to all EU states)

The Single Resolution Board (SRB) is the resolution authority within the European Banking Union and is a key element of the newly created Banking Union.

Participating Member State (Euro area)

Non-participating Member State (non-

Euro area)

Mission: to ensure an orderly resolution of failing banks with minimum impact on the real

economy and public finances of the participating Member States and beyond

Bank falls into trouble

Existing recovery plan is used to try and recover

Recovery fails

ECB determines that bank is likely to fail and informs

SRB

SRB finds systemic threat and/or critical functions

and no private alternative

Resolution scheme submitted to Commission

Under supervision from the SRB, NRAs implement plan/ resolution scheme

anticip

ate

s r

esolu

tion

uses existing plan/decides resolution scheme SRB

Function of the Single Resolution Board (SRB)

In charge of resolution planning, decisions and execution of resolution measures for LSIs. In charge of executing resolution decisions of the SRB in their jurisdictions.

NRAs

SRB

In charge of resolution planning, decisions and monitoring execution of resolution decisions for : • Significant institutions

(SI) under the direct supervision of the ECB

• Less significant institutions (LSI) with cross-border activities

Non Euro RA

Third

Countries’ RA

Resolution College

Crisis Management

Group

EURO AREA

SRB Monitoring

SRB Coordination

Allocation of tasks within the SRM from 2016

Engagement with non participating Member States and third countries

• According to Article 28 SRMR, the SRB "shall closely monitor the execution of the

resolution scheme by the national resolution authorities".

• The NRAs have to provide to the SRB upon request, at regular intervals,

information on the execution of the resolution scheme, the application of the

resolution tools and the exercise of resolution powers.

• The SRB may give specific instructions to the NRAs as to any aspect of the

execution of the resolution scheme.

• The NRAs have to take the necessary action to implement SRB decisions,

including specific instructions, by exercising their powers under national law

transposing the BRRD.

• If an NRA has not complied with a SRB decision, the SRB may:

• Directly order an institution under resolution to (i) transfer to another person

specified rights, assets or liabilities; or (ii) require the conversion of any debt

instruments which contain a contractual term for conversion.

• In addition, the SRB may order an institution "to adopt any other necessary

action" to comply with the SRB decision.

SRB’s monitoring role on execution of resolution schemes

• The SRB has the overall responsibility for the effective and consistent

functioning of the SRM.

• The NRAs are required to inform the SRB if they intend to take certain

measures, including the adoption of resolution decisions and the application of

resolution tools.

• The SRB may also take certain actions in relation to such entities. In particular, if

a draft decision does not comply with the SRM Regulation or with the SRB's

general instructions, the SRB may issue a warning to the NRA concerned.

• As a last resort, the SRB may decide to "take over" from the NRA the direct

power and responsibility for an entity.

• National Resolution Funds cannot be used anymore for the entities and groups

that fall under the scope of the SRM. Therefore, if the resolution of a less-

significant institution requires the use of the Single Resolution Fund, the SRB

takes also the resolution decisions.

SRB coordination role in relation to LSIs

SRB Governance

Plenary and Executive Sessions´ Tasks

SRB/SRM

Executive Session (Chair + Vice-Chair + 4

permanent Board Members + NRAs when relevant + Observers)

Resolution decision

Resolution scheme – exception – use of SRF above 5bn EUR

Commission Council

(a) non-objection procedure for resolution schemes

(b) Objection – Not fulfil public interest test

Resolution scheme

Plenary Session

(Chair + Vice-Chair + 4 perma-

nent Board Members + NRAs

+ Observers)

Approval of Resolution Plans

Executive Session - Decides on all

resolutions including on the use of the single resolution fund.

Plenary Session - Meets at least bi-

annually - For general matters not

related to a particular resolution.

Decisions in the Executive Session made by 5 voting members only (Vice-chair

only votes, if Chair is absent)

Approval of resolution plans

Banks active purely inside the Banking Union (BU)

Banks under the direct responsibility of the SRB and

active solely in BU

IRTs draft group resolution plan/MREL

determination/report on impediments

Consultation of ECB/NCAs and NRAs

SRB Executive Session approves resolution

plans/MREL/report on impediments

Banks under the direct responsibility of NRAs in the BU

NRAs drafts resolution plans subject to

guidelines and general instructions of SRB

NRAs notify material decisions and submit

resolution plans to SRB

SRB adopts resolution scheme in case the SRF is

used

For purely BU groups process involves setting up Internal Resolution Teams (IRTs), developing resolution strategies and drafting resolution plans

Resolution Colleges: Coordination within the EU

• The SRB shall set up a resolution college whenever an SRB bank has at least one

subsidiary or significant branch in a participating Member State and another one in a

non-participating Member State (Art 12, 13, 16, 18, 45 and 88-92 BRRD, and the EBA

draft RTS on resolution colleges)

• "The resolution college should not be a decision-making body, but a platform

facilitating decision-making by national authorities. The joint decision should be

taken by the national authorities concerned." (recital 98 of BRRD)

• Joint decisions should be taken on:

─ Group resolution plan and resolvability assessment

─ Minimum requirements for own funds and eligible liabilities (MREL)

─ Measures to address substantive impediments to resolvability (if needed)

─ Group resolution scheme (if needed)

• Joint decisions are to be taken by the resolution authorities of the group and

subsidiaries, after consulting the other members and observers of the college. If

there is no unanimity:

─ Binding mediation by the European Banking Authority (EBA)

─ Partial joint decisions

─ Individual decisions

Resolution Colleges: Members and key roles

Members Key roles within the College

Group-level resolution

authority

Chairs & co-ordinates resolution college

Prepares and circulates draft and final

reports and joint decision documents

Communicates with the Union parent

undertaking and the consolidating supervisor

Determines MREL for the parent undertaking

Takes joint decisions

Resolution authority of

subsidiaries

Communicates with the subsidiaries and the

competent authority in its member state

Proposes MREL at individual level for

subsidiaries

Takes joint decisions

Consolidating supervisor Consulted on joint decisions

Competent authority Consulted on joint decisions

Deposit Guarantee Scheme Consulted on joint decisions

Competent ministry Consulted on joint decisions

EBA (non voting member) Promotes and monitors the efficient and

consistent functioning of the college

Acts as a mediator if consulted

Observers:

Resolution

authorities of

subsidiaries or

significant

branches in third

countries may be

invited to

participate as

observers

Thank you!