This Directive (2014/59/EU)
is a centre-piece of the regulatory framework that was put in place to
create a safer and sounder financial sector in the wake of the financial
crisis. It is also important for the EU's Banking Union. The new BRRD
rules equip national authorities with the necessary tools and powers to
mitigate and manage the distress or failure of banks or large investment
firms in all EU Member States. The objective is to ensure that banks on
the verge of insolvency can be restructured without taxpayers having to
pay for failing banks to safeguard financial stability. To this end,
they provide inter alia for shareholders and creditors of the banks to
pay their share of the costs through a "bail-in" mechanism. It is
crucially important that such rules are in place in all Member States.
The deadline for the transposition of these rules into national law was
31 December 2014 (IP/14/2862).
The Commission sent a reasoned opinion to 11 EU Member States on 28 May 2015 (IP/15/5057),
asking them to transpose the BRRD. As full transposition of the new
rules did not occur in six EU Member States, they are now being referred
to the Court.
Referrals to the Court imply the imposition of, at
least, a daily penalty payment until full transposition has taken place.
The amount of such penalties are calculated in a way that takes into
account the payment capacity, the duration and degree of seriousness of
the infringement of the Member State concerned. The Commission can
decide to withdraw this case in the event that a Member State implements
the EU rules in question.
Background:
Since
2008,...
the European Commission has adopted a number of measures to
ensure the stability of financial and banking services. The Bank
Recovery and Resolution Directive (BRRD) was adopted in Spring 2014 to
provide authorities with comprehensive and effective arrangements to
deal with failing banks as well as cooperation arrangements to tackle
cross-border banking failures (IP/12/570).
For Member States which are part of the Euro area or participate in the
Banking Union, transposition of the BRRD is indispensable for the
Single Resolution Mechanism to function, as in many cases decisions of
the Single Resolution Board must be implemented based on national law
transposing the BRRD.
Under BRRD, banks are required to prepare
recovery plans to overcome financial distress. Authorities are also
granted a set of powers to intervene in the operations of banks to avoid
them failing. If they do face failure, authorities are equipped with
comprehensive powers and tools to restructure them, allocating losses to
shareholders and creditors following a clearly defined hierarchy. They
have the 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.
There are precise arrangements setting out how home
and host authorities of banking groups should cooperate in all stages
of cross-border resolution, from resolution planning to resolution
itself, with a strong role for the European Banking Authority to
coordinate and mediate in case of disagreements.
National
resolution funds are also being established. In the case of euro area
Member States, these funds will be replaced by the Single Resolution
Fund as of 2016.
The BRRD is being further complemented by
technical rules developed by the European Banking Authority on a number
of subjects, including concrete information requirements for recovery
and resolution plans and securing accurate valuations of assets and
losses at the point of resolution.
