10 June 2013

ECB Opinion on recovery and resolution plans in Belgium

The ECB was requested to deliver an opinion as a matter of extreme urgency to allow for this element of the Belgian crisis management framework to be adopted before the Belgian Parliament's summer recess

The draft law aims to strengthen the ability of Belgian credit institutions and public authorities to prevent future financial crises, or to prevent such crises from intensifying, and to react promptly in the event of a crisis, by introducing into Belgian law a framework governing the establishment and the assessment of recovery and resolution plans for credit institutions. Pending the designation of a resolution authority in Belgium, the draft law temporarily grants the NBB, in its capacity as supervisory authority, certain powers concerning recovery and resolution plans.

The ECB notes that the Belgian authorities have decided, in advance of the adoption of the BRRD, to transpose the provisions which they consider to be close to finalisation and which do not require institutional reform. The ECB understands that the responsibilities entrusted to the NBB by the draft law do not take into account the designation of a resolution authority in Belgium, which will be done at a later stage once the BRRD is adopted. Any resolution powers vested in the NBB  would need to be functionally separate from its current supervisory tasks, in order to ensure independence and avoid conflicts of interest. In the event that the NBB is not ultimately designated as the resolution authority, it is important that the designated resolution authority engages in an adequate exchange of information with the NBB in its capacity as central bank as well as supervisory authority. In addition, the ECB understands that, once the BRRD is adopted, the framework established under the draft law will be reviewed in order to ensure full consistency with developments at Union level.

The ECB welcomes the broad scope of application of the draft law, which will cover all Belgian credit institutions, including their branches and subsidiaries both in Belgium and abroad, in terms of the requirement for recovery and resolution plans. This will allow all credit institutions to benefit from a clear plan for remedial action in the event of emerging difficulties, and will provide clarity regarding their resolvability. The existence of such plans for all credit institutions also addresses potential concerns as regards ensuring a level playing field. The ECB notes that, to balance the extent of the scope of application against the necessary proportionality, the NBB will have the power to grant exemptions from the requirement to establish a recovery plan, based on the impact that the failure of an institution would have on financial stability or because the institution is part of a group for which the competent authorities have already communicated a recovery plan to the NBB. It is important to conduct a rigorous assessment as to why no potential threat to the system is considered likely in the event of the failure of an institution, demonstrating fully in the case in question why recovery planning is considered unnecessary.

Full opinion

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