On the proposal for a directive of the European Parliament and of the Council amending Directive 2014/59/EU as regards early intervention measures, conditions for resolution and financing of resolution action
A-9-2024-0153
Committee on Economic and Monetary Affairs · Rapporteur: Luděk Niedermayer
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Parliament's amended version of the proposed directive amends the EU bank resolution framework to improve early intervention, resolution conditions, and financing. It aims to reduce taxpayer funding, enhance depositor protection, and clarify rules for banks of all sizes.¶¶¶ The text specifies triggers for early intervention, simplifies resolution planning, and clarifies the public interest assessment. It also adjusts the ranking of deposits, the use of deposit guarantee schemes, and the calculation of resolution financing contributions.¶¶¶
Committee position. The Committee on Economic and Monetary Affairs proposes to amend the Commission's proposal, adopting a position that includes changes to early intervention, resolution planning, deposit ranking, and financing rules.¶¶
Key points
- Early intervention measures are clarified and expanded, including triggers based on qualitative factors, and the removal of management and appointment of temporary administrators are explicitly included.¶¶¶
- Resolution authorities must be notified early of material failure risks and can prepare for resolution without prior early intervention measures, including marketing the institution.¶¶¶
- The public interest assessment is specified: resolution is preferred if it better achieves objectives, and funding via industry-financed safety nets is favored over taxpayer money.¶¶¶
- Precautionary measures, including impaired asset measures, are allowed only for solvent institutions, must be temporary, and are limited to capital shortfalls identified in stress tests.¶¶¶
- The ranking of deposits is harmonized into two tiers: deposits of natural persons and SMEs rank higher than those of large enterprises and governments.¶¶¶
- Deposit guarantee schemes can contribute to resolution, but their contribution is limited by the least cost test and cannot exceed the cost of repaying covered depositors.¶¶¶
- Resolution financing arrangements can be used after a contribution of at least 8% of total liabilities, and their contribution is capped at 5%.¶¶¶
- The minimum requirement for own funds and eligible liabilities (MREL) is adjusted for transfer strategies, with a floor of 13.5% of risk exposure and 5% of exposure measure.¶¶¶
- Bail-inable liabilities include accounting provisions, and contingent liabilities are assessed in valuations to ensure sufficient recapitalization.¶¶¶
- Resolution authorities can request delay of disclosure of inside information on behalf of institutions under resolution.¶¶
- Resolution colleges are established for institutions with significant branches in other member states.¶¶
- Ex post contributions to resolution financing arrangements are capped at three times 12.5% of the target level, and ex ante contributions can be deferred for up to three years.¶¶¶
Who is affected
- Credit institutions and investment firms in the EU, including their subsidiaries and holding companies.¶¶
- Depositors, with enhanced protection for natural persons and SMEs.¶¶¶
- Deposit guarantee schemes, which may contribute to resolution but with limits.¶¶¶
- Resolution authorities and competent authorities, with new duties for coordination and reporting.¶¶¶
- Retail investors buying MREL-eligible instruments, with new safeguards.¶¶¶
Figures and deadlines
- 8% of total liabilities including own funds must be contributed before resolution financing arrangement access.¶
- 5% of total liabilities including own funds is the cap for resolution financing arrangement contribution.¶
- 13.5% of total risk exposure amount and 5% of total exposure measure are the lower bounds for MREL in transfer strategies.¶
- 30% of total contributions can be irrevocable payment commitments.¶
- Three times 12.5% of the target level is the cap for extraordinary ex post contributions.¶
- EUR 30,000 is the minimum initial investment for retail clients in MREL instruments.¶
- 10% of a retail client's financial instrument portfolio is the limit for MREL investments.¶
Legal basis: Article 114 of the Treaty on the Functioning of the European Union¶