{"id":17793,"date":"2022-09-17T22:43:46","date_gmt":"2022-09-17T22:43:46","guid":{"rendered":"http:\/\/legalblog.ie\/?p=17793"},"modified":"2022-09-25T14:01:59","modified_gmt":"2022-09-25T14:01:59","slug":"failing-banks","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/failing-banks\/","title":{"rendered":"Failing Banks [EU]"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Failing_banks_and_investment_firms_rules_and_procedures\" title=\"Failing banks and investment firms: rules and procedures\">Failing banks and investment firms: rules and procedures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/failing-banks\/#The_Single_Resolution_Board\" title=\"The Single Resolution Board\">The Single Resolution Board<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/failing-banks\/#The_single_resolution_fund\" title=\"The single resolution fund\">The single resolution fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Single_resolution_mechanism\" title=\"Single resolution mechanism\">Single resolution mechanism<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Banks_covered\" title=\"Banks covered\">Banks covered<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Loss-absorbing_and_recapitalisation_capacity_of_credit_institutions_and_investment_firms\" title=\"Loss-absorbing and recapitalisation capacity of credit institutions and investment firms\">Loss-absorbing and recapitalisation capacity of credit institutions and investment firms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Application_Background\" title=\"Application &amp; Background\">Application &amp; Background<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/legalblog.ie\/failing-banks\/#MAIN_DOCUMENTS\" title=\"MAIN DOCUMENTS\">MAIN DOCUMENTS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Failing_banks_and_investment_firms_rules_and_procedures-2\" title=\"Failing banks and investment firms: rules and procedures\">Failing banks and investment firms: rules and procedures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/legalblog.ie\/failing-banks\/#The_Single_Resolution_Board-2\" title=\"The Single Resolution Board\">The Single Resolution Board<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/legalblog.ie\/failing-banks\/#The_single_resolution_fund-2\" title=\"The single resolution fund\">The single resolution fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Single_resolution_mechanism-2\" title=\"Single resolution mechanism\">Single resolution mechanism<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Application_Background-2\" title=\"Application &amp; Background\">Application &amp; Background<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/legalblog.ie\/failing-banks\/#MAIN_DOCUMENTS-2\" title=\"MAIN DOCUMENTS\">MAIN DOCUMENTS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Addressing_troubled_financial_institutions_problems\" title=\"Addressing troubled financial institutions\u2019 problems\">Addressing troubled financial institutions\u2019 problems<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Banks_in_difficulties_%E2%80%94_prevention\" title=\"Banks in difficulties \u2014 prevention\">Banks in difficulties \u2014 prevention<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Failing_banks_%E2%80%94_restructuring_resolution\" title=\"Failing banks \u2014 restructuring (resolution)\">Failing banks \u2014 restructuring (resolution)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/legalblog.ie\/failing-banks\/#National_resolution_funds_to_provide_financial_support_for_banks_restructuring_plans\" title=\"National resolution funds to provide financial support for banks\u2019 restructuring plans\">National resolution funds to provide financial support for banks\u2019 restructuring plans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Application_Background-3\" title=\"Application &amp; Background\">Application &amp; Background<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/legalblog.ie\/failing-banks\/#MAIN_DOCUMENT\" title=\"MAIN DOCUMENT\">MAIN DOCUMENT<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Crisis_management_in_the_financial_sector\" title=\"Crisis management in the financial sector\">Crisis management in the financial sector<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Scope\" title=\"Scope\">Scope<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Objectives\" title=\"Objectives\">Objectives<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Supervisory_authorities\" title=\"Supervisory authorities\">Supervisory authorities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Bank_Recovery_and_Resolution_Directive\" title=\"Bank Recovery and Resolution Directive\">Bank Recovery and Resolution Directive<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Deposit_Guarantee_Schemes_DGSs_Directive\" title=\"Deposit Guarantee Schemes (DGSs) Directive\">Deposit Guarantee Schemes (DGSs) Directive<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/legalblog.ie\/failing-banks\/#Background\" title=\"Background\">Background<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/legalblog.ie\/failing-banks\/#MAIN_DOCUMENT-2\" title=\"MAIN DOCUMENT\">MAIN DOCUMENT<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Failing_banks_and_investment_firms_rules_and_procedures\"><\/span>Failing banks and investment firms: rules and procedures<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Regulation (EU) No 806\/2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund<\/p>\n<p>Regulation (EU) 2019\/877 amending Regulation (EU) No 806\/2014 as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms<\/p>\n<p>Regulation (EU) No 806\/2014 sets out the structure of the Single Resolution Board (SRB). It is made up of a chair, a vice-chair, 4 permanent members and the authorities from all participating EU countries. It operates in:<br \/>\nexecutive sessions: the chair, 4 further independent full-time members, 2 permanent observers appointed by the European Commission and by the European Central Bank (ECB) and, in specific cases, representatives of national resolution authorities of participating countries or other observers; and<br \/>\nplenary sessions: the full board, as above, and representatives of all national resolution authorities of participating countries.<\/p>\n<p>It introduces uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms through a single resolution mechanism and the use of a single resolution fund.<\/p>\n<p>While the regulation applies to euro area countries, other EU countries are also allowed to participate.<br \/>\nRegulation (EU) 2019\/877 amends the original regulation to incorporate in EU legislation international standards on loss-absorption and recapitalisation for banks set by the Financial Stability Board.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_Single_Resolution_Board\"><\/span>The Single Resolution Board<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When a bank is deemed to be in a crisis situation, the board may put together a resolution scheme that is passed on to the Commission for formal approval. If the Commission has no objections, the scheme should be adopted within 24 hours. In some specific cases, the Commission can request the Council to approve its amendments to the scheme.<\/p>\n<p>A resolution scheme of less than \u20ac5 billion from the single resolution fund is decided in executive session board meetings, which only include the national resolution authority from the EU country where the bank in crisis is located.<br \/>\nWhen more than \u20ac5 billion is needed, decisions are taken by the plenary session.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_single_resolution_fund\"><\/span>The single resolution fund<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Funded by banks from 2016 onwards, the single resolution fund should amount to 1% of insured deposits in all participating EU countries (for a total of around \u20ac55 billion) in 2024. Along with Regulation (EU) No 806\/2014, an intergovernmental agreement was signed between participating EU countries. This allows for:<br \/>\nthe transfer of banks\u2019 contributions to national compartments of the fund; and<br \/>\nthe progressive mutualisation* of those contributions in the fund.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Single_resolution_mechanism\"><\/span>Single resolution mechanism<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Together, the SRB and the single resolution fund make up the single resolution mechanism. This system and the single supervisory mechanism, that gives supervisory powers to the ECB, are the foundations of the EU\u2019s banking union, which applies to euro area countries. Other EU countries may also participate.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Banks_covered\"><\/span>Banks covered<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The SRB is responsible for the resolution of all banks that are supervised by the ECB. As in the case of the single supervisory mechanism, the SRB is directly responsible for the largest banks that are directly supervised by the ECB and for other cross-border banks.<br \/>\nOther banks remain under the direct responsibility of their national resolution authorities. However, they remain under the indirect responsibility of the SRB, and the SRB may step in if their resolution scheme requires the use of the single resolution fund.<br \/>\nCalculation of individual institutions\u2019 contributions<\/p>\n<p>Regulation (EU) 2015\/81 lays down rules relating to the obligation of the SRB to calculate the contributions for individual institutions and the methodology for their calculation.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Loss-absorbing_and_recapitalisation_capacity_of_credit_institutions_and_investment_firms\"><\/span>Loss-absorbing and recapitalisation capacity of credit institutions and investment firms<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In incorporating international standards on loss absorption and recapitalisation into EU law for global systemically important banks and amending the existing rules for other banks, Regulation (EU) 2019\/877 provides for the rules for banks to deal with losses by ensuring that they hold enough capital and other liabilities to minimise as much as possible any taxpayer bail-outs.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Application_Background\"><\/span>Application &amp; Background<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Regulation (EU) No 806\/2014 has applied since 1 January 2016. However, some rules, such as the start of the board\u2019s activities, have applied since 1 January 2015.<br \/>\nRegulation (EU) 2019\/877 applies from 28 December 2020.<\/p>\n<p>For more information, see:<\/p>\n<p>Single resolution mechanism (European Commission)<br \/>\nSingle supervisory mechanism (European Commission)<br \/>\nCommunication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (European Commission).<br \/>\nKEY TERMS<\/p>\n<p>Mutualisation: the process by which the costs of restructuring are shared by the participating banks.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"MAIN_DOCUMENTS\"><\/span>MAIN DOCUMENTS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Regulation (EU) No 806\/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093\/2010 (OJ L 225, 30.7.2014, pp. 1-90)<\/p>\n<p>Regulation (EU) 2019\/877 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 806\/2014 as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms (OJ L 150, 7.6.2019, pp. 226-252)<\/p>\n<p>RELATED DOCUMENTS<\/p>\n<p>Council Regulation (EU) No 1024\/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, pp. 63-89)<\/p>\n<p>Regulation (EU) No 1022\/2013 of the European Parliament and of the Council of 22 October 2013 amending Regulation (EU) No 1093\/2010 establishing a European Supervisory Authority (European Banking Authority) as regards the conferral of specific tasks on the European Central Bank pursuant to Council Regulation (EU) No 1024\/2013 (OJ L 287, 29.10.2013, pp. 5-14)<\/p>\n<p>Council Implementing Regulation (EU) 2015\/81 of 19 December 2014 specifying uniform conditions of application of Regulation (EU) No 806\/2014 of the European Parliament and of the Council with regard to ex ante contributions to the Single Resolution Fund (OJ L 15, 22.1.2015, pp. 1-7)<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Failing_banks_and_investment_firms_rules_and_procedures-2\"><\/span>Failing banks and investment firms: rules and procedures<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Regulation (EU) No 806\/2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund<\/p>\n<p>Regulation (EU) 2019\/877 amending Regulation (EU) No 806\/2014 as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms<\/p>\n<p>Regulation (EU) No 806\/2014 sets out the structure of the Single Resolution Board (SRB). It is made up of a chair, a vice-chair, 4 permanent members and the authorities from all participating EU countries. It operates in:<br \/>\nexecutive sessions: the chair, 4 further independent full-time members, 2 permanent observers appointed by the European<\/p>\n<p>Commission and by the European Central Bank (ECB) and, in specific cases, representatives of national resolution authorities of participating countries or other observers; and<br \/>\nplenary sessions: the full board, as above, and representatives of all national resolution authorities of participating countries.<\/p>\n<p>It introduces uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms through a single resolution mechanism and the use of a single resolution fund.<\/p>\n<p>While the regulation applies to euro area countries, other EU countries are also allowed to participate.<br \/>\nRegulation (EU) 2019\/877 amends the original regulation to incorporate in EU legislation international standards on loss-absorption and recapitalisation for banks set by the Financial Stability Board.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_Single_Resolution_Board-2\"><\/span>The Single Resolution Board<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When a bank is deemed to be in a crisis situation, the board may put together a resolution scheme that is passed on to the Commission for formal approval. If the Commission has no objections, the scheme should be adopted within 24 hours. In some specific cases, the Commission can request the Council to approve its amendments to the scheme.<\/p>\n<p>A resolution scheme of less than \u20ac5 billion from the single resolution fund is decided in executive session board meetings, which only include the national resolution authority from the EU country where the bank in crisis is located.<br \/>\nWhen more than \u20ac5 billion is needed, decisions are taken by the plenary session.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_single_resolution_fund-2\"><\/span>The single resolution fund<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Funded by banks from 2016 onwards, the single resolution fund should amount to 1% of insured deposits in all participating EU countries (for a total of around \u20ac55 billion) in 2024. Along with Regulation (EU) No 806\/2014, an intergovernmental agreement was signed between participating EU countries. This allows for:<br \/>\nthe transfer of banks\u2019 contributions to national compartments of the fund; and<br \/>\nthe progressive mutualisation* of those contributions in the fund.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Single_resolution_mechanism-2\"><\/span>Single resolution mechanism<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Together, the SRB and the single resolution fund make up the single resolution mechanism. This system and the single supervisory mechanism, that gives supervisory powers to the ECB, are the foundations of the EU\u2019s banking union, which applies to euro area countries. Other EU countries may also participate.<br \/>\nBanks covered<\/p>\n<p>The SRB is responsible for the resolution of all banks that are supervised by the ECB. As in the case of the single supervisory mechanism, the SRB is directly responsible for the largest banks that are directly supervised by the ECB and for other cross-border banks.<\/p>\n<p>Other banks remain under the direct responsibility of their national resolution authorities. However, they remain under the indirect responsibility of the SRB, and the SRB may step in if their resolution scheme requires the use of the single resolution fund.<br \/>\nCalculation of individual institutions\u2019 contributions<\/p>\n<p>Regulation (EU) 2015\/81 lays down rules relating to the obligation of the SRB to calculate the contributions for individual institutions and the methodology for their calculation.<\/p>\n<p>Loss-absorbing and recapitalisation capacity of credit institutions and investment firms<\/p>\n<p>In incorporating international standards on loss absorption and recapitalisation into EU law for global systemically important banks and amending the existing rules for other banks, Regulation (EU) 2019\/877 provides for the rules for banks to deal with losses by ensuring that they hold enough capital and other liabilities to minimise as much as possible any taxpayer bail-outs.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Application_Background-2\"><\/span>Application &amp; Background<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Regulation (EU) No 806\/2014 has applied since 1 January 2016. However, some rules, such as the start of the board\u2019s activities, have applied since 1 January 2015.<br \/>\nRegulation (EU) 2019\/877 applies from 28 December 2020.<\/p>\n<p>For more information, see:<\/p>\n<p>Single resolution mechanism (European Commission)<br \/>\nSingle supervisory mechanism (European Commission)<br \/>\nCommunication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (European Commission).<br \/>\nKEY TERMS<\/p>\n<p>Mutualisation: the process by which the costs of restructuring are shared by the participating banks.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"MAIN_DOCUMENTS-2\"><\/span>MAIN DOCUMENTS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Regulation (EU) No 806\/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093\/2010 (OJ L 225, 30.7.2014, pp. 1-90)<\/p>\n<p>Regulation (EU) 2019\/877 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 806\/2014 as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms (OJ L 150, 7.6.2019, pp. 226-252)<\/p>\n<p>RELATED DOCUMENTS<\/p>\n<p>Council Regulation (EU) No 1024\/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, pp. 63-89)<\/p>\n<p>Regulation (EU) No 1022\/2013 of the European Parliament and of the Council of 22 October 2013 amending Regulation (EU) No 1093\/2010 establishing a European Supervisory Authority (European Banking Authority) as regards the conferral of specific tasks on the European Central Bank pursuant to Council Regulation (EU) No 1024\/2013 (OJ L 287, 29.10.2013, pp. 5-14)<\/p>\n<p>Council Implementing Regulation (EU) 2015\/81 of 19 December 2014 specifying uniform conditions of application of Regulation (EU) No 806\/2014 of the European Parliament and of the Council with regard to ex ante contributions to the Single Resolution Fund (OJ L 15, 22.1.2015, pp. 1-7)<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Addressing_troubled_financial_institutions_problems\"><\/span>Addressing troubled financial institutions\u2019 problems<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Directive 2014\/59\/EU \u2014 rules for the recovery and resolution of credit institutions and investment firms<\/p>\n<p>Because many EU countries had to inject public money into their banking systems to rescue banks in the wake of the 2008 financial crisis, this act sets out new rules to deal with troubled institutions.<br \/>\nIt aims to avoid \u2018bail-outs\u2019 that involve the use of taxpayers\u2019 money in future cases of bank failure.<br \/>\nIt establishes common European rules for the recovery and restructuring of failing banks.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Banks_in_difficulties_%E2%80%94_prevention\"><\/span>Banks in difficulties \u2014 prevention<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Each bank has to prepare a recovery plan which it submits to its national competent authority.<br \/>\nThe national resolution authority has also to draw up a resolution plan in case recovery is not effective and restructuring (resolution) is necessary.<\/p>\n<p>Both plans set out the actions to be taken in the event that a bank were to run into difficulties leading to its failure.<br \/>\nBanks in a difficult financial situation \u2014 early intervention<\/p>\n<p>When a bank is in a difficult financial situation, the national competent authority has the power to intervene, such as by appointing a temporary administrator of the bank.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Failing_banks_%E2%80%94_restructuring_resolution\"><\/span>Failing banks \u2014 restructuring (resolution)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>If the bank\u2019s downward spiral continues, the national resolution authority has a variety of powers to minimise the cost to taxpayers of its failure. The most important power is to require the private sector to bear the costs first.<br \/>\nThis \u2018bail-in\u2019 mechanism, which marks a change of tack compared to the public \u2018bail-out\u2019 tool, entered into force, at the latest, in January 2016. EU countries could already decide to incorporate the bail-in tool into their legal systems before that date.<\/p>\n<p>When a bank collapses, shareholders are first in line to cover the restructuring costs; then creditors would be asked to contribute, with those with non-guaranteed deposits (over \u20ac100,000) stepping in last.<\/p>\n<p>The shareholders and creditors have to contribute to the losses of the failing institution; they cover the losses up to at least 8 % of the total liabilities (debts or obligations) of the bank undergoing a restructuring plan. If there are still losses to cover, the resolution fund (see below) can intervene. Other powers in the hands of national authorities include the possibility to sell the institution undergoing restructuring or merge it with another one.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"National_resolution_funds_to_provide_financial_support_for_banks_restructuring_plans\"><\/span>National resolution funds to provide financial support for banks\u2019 restructuring plans<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Each EU country has to establish a national resolution fund financed in advance by credit institutions and investment firms established in its territory. This fund is to be used to finance the restructuring of a failing bank.<\/p>\n<p>Between 2015 and 2017, the European Commission adopted a series of acts that supplement Directive 2014\/59\/EU. These include:<\/p>\n<p>Regulation (EU) 2015\/63 on<br \/>\nthe calculation and the adjustment to the risk profile of institutions, of the contributions to be paid by banks to resolution funds<br \/>\ninformation that banks must provide so their contribution to a resolution fund can be calculated.<br \/>\nRegulation (EU) 2016\/778 on<br \/>\nthe circumstances and conditions under which the institution\u2019s repayment contributions to a resolution fund may be partially or entirely postponed;<br \/>\nthe criteria to determine the activities, services and operations with regard to the institution\u2019s functions which are essential to the economy; and<br \/>\ncriteria to determine the business lines and associated services with regard to core business lines.<br \/>\nRegulation (EU) 2016\/911 on technical standards with regard to the form and the content of the description of group financial support agreements;<br \/>\nRegulation (EU) 2016\/962 on technical standards with regard to the uniform formats, templates and definitions for the identification and transmission of information by competent authorities and resolution authorities to the European Banking Authority;<br \/>\nRegulation (EU) 2016\/1075 on, among other things, standards for the content of recovery plans, resolution plans and group resolution plans;<br \/>\nRegulation (EU) 2016\/1400 on the minimum elements of a business reorganisation plan and the minimum contents of the reports on its implementation;<br \/>\nRegulation (EU) 2016\/1401 on standards for methodologies and principles on the valuation of liabilities arising from derivatives;<br \/>\nRegulation (EU) 2016\/1450 on criteria relating to the methodology for setting the minimum requirement for own funds and eligible liabilities;<br \/>\nRegulation (EU) 2016\/1066 on standards for presenting information for the purpose of resolution plans for credit institutions and investment firms;<br \/>\nRegulation (EU) 2016\/1712 on standards for information on financial contracts;<br \/>\nRegulation (EU) 2017\/867 on classes of arrangements to be protected in a partial property transfer.<br \/>\nIn 2017, Directive 2014\/59\/EU was amended by Directive (EU) 2017\/2399. It incorporates into EU law the G20 Total Loss-Absorbing<\/p>\n<p>Capacity (TLAC) standard. This standard ensures that if the global systemically important banks fail, they will have sufficient funds available for authorities to implement an orderly resolution that:<\/p>\n<p>minimises the impact on financial stability,<br \/>\nensures that core activities can be maintained, and<br \/>\navoids exposing public funds to loss.<\/p>\n<p>In 2018, Regulation (EU) 2018\/308 was adopted. It lays down implementing technical standards for Directive 2014\/59\/EU with regard to formats, templates and definitions for the identification and transmission of information by resolution authorities for the purposes of informing the European Banking Authority of the minimum requirement for own funds and eligible liabilities.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Application_Background-3\"><\/span>Application &amp; Background<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It has applied since 2 July 2014 and it had to become law in the EU countries by 31 December 2014.<\/p>\n<p>For more information, see:<\/p>\n<p>Bank recovery and resolution (European Commission)<br \/>\nCommunication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak<\/p>\n<h3><span class=\"ez-toc-section\" id=\"MAIN_DOCUMENT\"><\/span>MAIN DOCUMENT<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Directive 2014\/59\/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82\/891\/EEC, and Directives 2001\/24\/EC, 2002\/47\/EC, 2004\/25\/EC, 2005\/56\/EC, 2007\/36\/EC, 2011\/35\/EU, 2012\/30\/EU and 2013\/36\/EU, and Regulations (EU) No 1093\/2010 and (EU) No 648\/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, pp. 190-348)<\/p>\n<p>Successive amendments to Directive 2014\/59\/EU have been incorporated in the original text. This consolidated version is of documentary value only.<\/p>\n<p>RELATED DOCUMENTS<\/p>\n<p>Commission Implementing Regulation (EU) 2018\/308 of 1 March 2018 laying down implementing technical standards for Directive 2014\/59\/EU of the European Parliament and of the Council with regard to formats, templates and definitions for the identification and transmission of information by resolution authorities for the purposes of informing the European Banking Authority of the minimum requirement for own funds and eligible liabilities (OJ L 60, 2.3.2018, pp. 7-15)<\/p>\n<p>Commission Delegated Regulation (EU) 2017\/867 of 7 February 2017 on classes of arrangements to be protected in a partial property transfer under Article 76 of Directive 2014\/59\/EU of the European Parliament and of the Council (OJ L 131, 20.5.2017, pp. 15-19)<\/p>\n<p>Commission Delegated Regulation (EU) 2016\/1712 of 7 June 2016 supplementing Directive 2014\/59\/EU of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms with regard to regulatory technical standards specifying a minimum set of the information on financial contracts that should be contained in the detailed records and the circumstances in which the requirement should be imposed (OJ L 258, 24.9.2016, pp. 1-7)<\/p>\n<p>Commission Implementing Regulation (EU) 2016\/1066 of 17 June 2016 laying down implementing technical standards with regard to procedures, standard forms and templates for the provision of information for the purpose of resolution plans for credit institutions and investment firms pursuant to Directive 2014\/59\/EU of the European Parliament and of the Council (OJ L 181, 6.7.2016, pp. 1-38)<\/p>\n<p>Commission Delegated Regulation (EU) 2016\/1450 of 23 May 2016 supplementing Directive 2014\/59\/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the criteria relating to the methodology for setting the minimum requirement for own funds and eligible liabilities (OJ L 237, 3.9.2016, pp. 1-9)<\/p>\n<p>Commission Delegated Regulation (EU) 2016\/1401 of 23 May 2016 supplementing Directive 2014\/59\/EU of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms with regard to regulatory technical standards for methodologies and principles on the valuation of liabilities arising from derivatives (OJ L 228, 23.8.2016, pp. 7-15)<\/p>\n<p>Commission Delegated Regulation (EU) 2016\/1400 of 10 May 2016 supplementing Directive 2014\/59\/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the minimum elements of a business reorganisation plan and the minimum contents of the reports on the progress in the implementation of the plan (OJ L 228, 23.8.2016, pp. 1-6)<\/p>\n<p>Commission Delegated Regulation (EU) 2016\/1075 of 23 March 2016 supplementing Directive 2014\/59\/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the content of recovery plans, resolution plans and group resolution plans, the minimum criteria that the competent authority is to assess as regards recovery plans and group recovery plans, the conditions for group financial support, the requirements for independent valuers, the contractual recognition of write-down and conversion powers, the procedures and contents of notification requirements and of notice of suspension and the operational functioning of the resolution colleges (OJ L 184, 8.7.2016, pp. 1-71)<\/p>\n<p>See consolidated version.<\/p>\n<p>Commission Implementing Regulation (EU) 2016\/962 of 16 June 2016 laying down implementing technical standards with regard to the uniform formats, templates and definitions for the identification and transmission of information by competent authorities and resolution authorities to the European Banking Authority according to Directive 2014\/59\/EU of the European Parliament and of the Council (OJ L 160, 17.6.2016, pp. 35-49)<\/p>\n<p>Commission Implementing Regulation (EU) 2016\/911 of 9 June 2016 laying down implementing technical standards with regard to the form and the content of the description of group financial support agreements in accordance with Directive 2014\/59\/EU of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms (OJ L 153, 10.6.2016, pp. 25-27)<\/p>\n<p>Commission Delegated Regulation (EU) 2016\/778 of 2 February 2016 supplementing Directive 2014\/59\/EU of the European Parliament and of the Council with regard to the circumstances and conditions under which the payment of extraordinary ex post contributions may be partially or entirely deferred, and on the criteria for the determination of the activities, services and operations with regard to critical functions, and for the determination of the business lines and associated services with regard to core business lines (OJ L 131, 20.5.2016, pp. 41-47)<\/p>\n<p>Commission Delegated Regulation (EU) 2015\/63 of 21 October 2014 supplementing Directive 2014\/59\/EU of the European Parliament and of the Council with regard to ex ante contributions to resolution financing arrangements (OJ L 11, 17.1.2015, pp. 44-<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Crisis_management_in_the_financial_sector\"><\/span>Crisis management in the financial sector<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Communication (COM(2010) 579 final) \u2014 an EU Framework for Crisis Management in the Financial Sector<\/p>\n<p>It sets out the steps to be taken to equip the European Union (EU) with a set of rules for crisis management in the financial sector.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Scope\"><\/span>Scope<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The set of rules for crisis management in the financial sector concerns:<\/p>\n<p>all credit institutions;<br \/>\ncertain investment firms, more particularly those whose failure might put the financial system at risk.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Objectives\"><\/span>Objectives<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The aim of these rules is to ensure that the financial system is stable, even in the event of a business failure, and to:<\/p>\n<p>encourage prevention and preparation to reduce risks in the financial system;<br \/>\nprepare credible resolution tools;<br \/>\nimplement fast and effective means to act;<br \/>\nreduce moral hazard by ensuring shareholders contribute to costs;<br \/>\ncontribute to a smooth resolution of cross-border groups to preserve the internal market;<br \/>\nensure legal certainty;<br \/>\nlimit competitive distortions.<br \/>\nAreas of action<\/p>\n<p>The communication identified measures that should be taken in the following areas:<\/p>\n<p>authorities responsible for crisis management \u2014 each EU country must designate a resolution authority that is independent from the supervisor;<br \/>\npreparatory and preventative measures \u2014 including the implementation of a supervisory programme for each supervised institution and on-site supervisory examinations;<br \/>\ntriggers \u2014 early intervention should be put in place in case a bank or investment firm cannot satisfy the requirements of the Capital<\/p>\n<p>Requirements Directive;<br \/>\nearly intervention \u2014 provides for the widening and clarifying of supervisors\u2019 powers. Banks and businesses would be obliged to present a plan enabling the institution to recover in the event of financial difficulties;<br \/>\ndebt write-down \u2014 allowing an institution in difficulty to continue its activities or to cease some of them in order to limit risks of \u2018contagion\u2019 to other institutions;<br \/>\nresolution \u2014 reform legislation on bank insolvency in order that failing banks may benefit from liquidation proceedings.<\/p>\n<p>Action taken<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Supervisory_authorities\"><\/span>Supervisory authorities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>European supervisory authorities were established in 2011:<\/p>\n<p>the European Banking Authority (EBA), which deals with bank supervision, including the supervision of the recapitalisation of banks;<br \/>\nthe European Securities and Markets Authority (ESMA), which deals with the supervision of capital markets and carries out direct supervision with regard to credit rating agencies and trade repositories; and<br \/>\nthe European Insurance and Occupational Pensions Authority (EIOPA), which deals with insurance supervision.<\/p>\n<p>The 28 national supervisors are represented in all 3 supervising authorities.<\/p>\n<p>A European Systemic Risk Board was established to monitor and assess potential threats to financial stability that arise from macro-economic developments and from developments within the financial system as a whole.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Bank_Recovery_and_Resolution_Directive\"><\/span>Bank Recovery and Resolution Directive<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>This directive (Directive 2014\/59\/EU) entered into force in all EU countries in July 2014. It sets out a number of rules to harmonise and improve the tools for dealing with bank crises across the EU, including:<\/p>\n<p>banks are required to prepare recovery plans to overcome financial distress;<br \/>\nauthorities are granted a set of powers to intervene in the operations of banks to avoid their failure;<br \/>\nauthorities also have powers to implement plans to resolve failed banks in a way that preserves their most critical functions and avoids taxpayers having to bail them out;<br \/>\na Single Resolution Fund for countries in the euro area was established in 2016; separate national funds remain in place for those EU countries outside the area;<br \/>\nprocedures to improve cooperation between national authorities.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Deposit_Guarantee_Schemes_DGSs_Directive\"><\/span>Deposit Guarantee Schemes (DGSs) Directive<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>This directive (Directive 2014\/49\/EU) entered into force in 2014. It strengthens the existing system of national DGS to respond to the weaknesses revealed by the financial crisis. Its key elements include:<\/p>\n<p>universal guarantee of deposits up to \u20ac100,000;<br \/>\neasier and faster access to repayment \u2014 a gradual reduction in payment deadlines from 20 working days to 7 working days;<br \/>\nmore robust financing regime;<br \/>\nbetter information for depositors.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Background\"><\/span>Background<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>\u2018Crisis management\u2019 on the European Commission&#8217;s website<br \/>\nEuropean Commission press release \u2018A comprehensive EU response to the financial crisis: substantial progress towards a strong financial framework for Europe and a banking union for the eurozone\u2019.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"MAIN_DOCUMENT-2\"><\/span>MAIN DOCUMENT<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Central Bank \u2014 An EU Framework for Crisis Management in the Financial Sector (COM(2010) 579 final, 20.10.2010)<\/p>\n<p>RELATED DOCUMENTS<\/p>\n<p>Directive 2014\/49\/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, pp. 149\u2013178)<\/p>\n<p>Successive amendments to Directive 2014\/49\/EU have been incorporated in the original text. This consolidated version is of documentary value only.<\/p>\n<p>Directive 2014\/59\/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82\/891\/EEC, and Directives 2001\/24\/EC, 2002\/47\/EC, 2004\/25\/EC, 2005\/56\/EC, 2007\/36\/EC, 2011\/35\/EU, 2012\/30\/EU and 2013\/36\/EU, and Regulations (EU) No 1093\/2010 and (EU) No 648\/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, pp. 190\u2013348)<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-17793\" data-postid=\"17793\" class=\"themify_builder_content themify_builder_content-17793 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Failing banks and investment firms: rules and procedures Regulation (EU) No 806\/2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund Regulation (EU) 2019\/877 amending Regulation (EU) No 806\/2014 as regards the loss-absorbing and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[128,52],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/17793"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=17793"}],"version-history":[{"count":3,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/17793\/revisions"}],"predecessor-version":[{"id":18360,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/17793\/revisions\/18360"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=17793"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=17793"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=17793"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}