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!