22 September 2014

European Banking Authority consults on triggers for early intervention and resolution

The new BRRD regulatory framework has introduced a common set of early intervention measures that complement existing supervisory powers and measures, established under the CRD and applied according to the EBA Guidelines for common procedures and methodologies for SREP. The Guidelines on triggers for early intervention issued by the EBA are addressed to competent authorities and clarify the conditions for using early intervention measures foreseen by the BRRD. The triggers for early intervention are to a large extent based on the outcomes of the SREP, expressed both in terms of Overall SREP score and scores for individual SREP elements. The draft Guidelines also provide the possibility of triggering early intervention measures on the basis of significant events and material deterioration or anomalies in the key indicators monitored by the competent authorities, before they are fully reflected in the SREP scores.

Determining that an institution is failing or likely to fail is the necessary element to start any resolution process. This determination is made by the relevant competent authority, but Member States may grant this power to the relevant resolution authority too. In this regard, the draft Guidelines provide separate guidance for the competent authorities, where the determination is based primarily on the outcomes of the SREP assessment of the viability of an institution, and for the resolution authorities, where the determination is based on the objective elements specified in the Guidelines (which cover an institution's capital and liquidity position, as well as other requirements for continuing its authorisation).

While respecting the functional and operational independence of competent and resolution authorities, the Guidelines aim to ensure consistency in the outcome of their assessment of whether an institution is failing or likely to fail. In particular, the core areas to be assessed (i.e.. capital position, liquidity position and other requirements for continuing authorisation) are covered both in the objective elements for the resolution authorities and in the SREP assessment conducted by the competent authorities. The scope of the draft Guidelines on resolution triggers is expanded to provide guidance on the consultation, as well as information exchange between the competent authorities and resolution authorities in order to determine if an institution is failing or likely to fail. The goal is to enhance coordination of supervisory and resolution practices.

The Guidelines published for consultation complement the EBA Guidelines for common procedures and methodologies for SREP and together they form a set of supervisory guidance linking on-going supervision, early intervention and resolution.

Comments to these consultations can be sent to the EBA by 22 December 2014. A public hearing will then take place at the EBA premises on 10 November 2014 from 14.00 to 17.00 UK time.

Press release

Consultation paper on early interventions triggers

Consultation paper on failing or likely to fail

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