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REPORT (COM(2023)0226 – C90139/2023 – 2023/0111(COD))

On the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 806/2014 as regards early intervention measures, conditions for resolution and funding of resolution action

A-9-2024-0155

Committee on Economic and Monetary Affairs · Rapporteur: Pedro Marques

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Parliament's amended version of the proposed regulation amending the Single Resolution Mechanism Regulation (EU) No 806/2014 on early intervention, resolution conditions, and funding. It aims to improve the effectiveness of the resolution framework for banks and investment firms. The amendments specify early intervention measures by the ECB, clarify resolution conditions and public interest assessment, adjust the minimum requirement for own funds and eligible liabilities (MREL), and modify rules on the Single Resolution Fund and deposit guarantee scheme contributions.

Committee position. The Committee on Economic and Monetary Affairs proposes to amend the Commission proposal, adopting a revised version of the regulation.

Key points

  1. The ECB is given a directly applicable set of early intervention measures, including requiring management changes, appointing temporary administrators, and drawing up action plans, with simplified triggers.
  2. The Board may instruct national resolution authorities to exercise certain powers under Directive 2014/59/EU, such as requiring records of financial contracts or suspending obligations.
  3. Resolution plans are not required for entities being wound up under national law or for residual institutions after transfer strategies.
  4. The MREL for transfer strategies (sale of business or bridge institution) is to be set proportionately, with a floor of 13.5% of risk exposure and 5% of exposure measure.
  5. The public interest assessment must consider whether winding up would achieve resolution objectives more effectively, and funding through industry-funded safety nets is preferred over taxpayer money.
  6. Extraordinary public financial support is allowed only in exceptional cases, with conditions including solvency, precautionary nature, and limits on Common Equity Tier 1 acquisitions to 2% of risk exposure.
  7. The Single Resolution Fund may contribute only after losses of at least 8% of total liabilities are absorbed, and its contribution is capped at 5% of total liabilities.
  8. The Board gains a claim against residual entities for Fund expenses, with priority ranking equal to national resolution financing arrangements.
  9. Deposit guarantee schemes must contribute to resolution to protect covered and eligible deposits of natural persons and SMEs, with the Board determining the amount.
  10. The Board may defer collection of ex-ante contributions for up to three years if costs are disproportionate, and extraordinary ex-post contributions are capped at three times 12.5% of the target level.
  11. The Commission must report on liquidity in resolution by 31 December 2024 and on internal loss transfer mechanisms by 31 December 2026.

Who is affected

  • Credit institutions and investment firms within the scope of the Single Resolution Mechanism, including their shareholders and creditors.
  • The European Central Bank, national competent authorities, and national resolution authorities, which gain new powers and duties.
  • Deposit guarantee schemes, which may be required to contribute to resolution actions.
  • The Single Resolution Board, which has new responsibilities for MREL, early intervention coordination, and Fund management.

Figures and deadlines

  • 8% of total liabilities including own funds must be absorbed by shareholders and creditors before Fund contribution.
  • Fund contribution is limited to 5% of total liabilities including own funds.
  • MREL floor for transfer strategies: 13.5% of total risk exposure amount and 5% of total exposure measure.
  • Common Equity Tier 1 acquisitions under precautionary measures are capped at 2% of total risk exposure amount.
  • Deadline for entities to comply with new MREL requirements is four years from application, with intermediate targets at two years.
  • Temporary administrators are appointed for a maximum of 1 year, renewable once.
  • Extraordinary ex-post contributions per year are capped at three times 12.5% of the target level.
  • Commission reports due by 31 December 2024 and 31 December 2026.

Legal basis: Article 114 of the Treaty on the Functioning of the European Union