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DRAFT REPORT (COM(2023)0227 – C90135/2023 – 2023/0112(COD))

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

ECON-PR-753712

Committee on Economic and Monetary Affairs · Rapporteur: Luděk Niedermayer

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The draft report proposes amendments to the Commission's directive amending Directive 2014/59/EU on bank resolution. It introduces a two-tier depositor preference, clarifies the public interest assessment, and adjusts rules on extraordinary public financial support. It aims to reduce reliance on taxpayers' money, favouring industry-funded safety nets, and to ensure resolution is used only when it minimizes overall costs and risks. The amendments also address critical functions, recovery plan updates, notification of failing institutions, and the role of the European Banking Authority in monitoring the public interest assessment.

Committee position. The rapporteur proposes amendments to the Commission's proposal, introducing a two-tier depositor preference, clarifying the public interest assessment, and restricting extraordinary public financial support to large-scale systemic events.

Key points

  1. The directive's objective is to better safeguard taxpayers' money and establish mechanisms for potential insolvency of financial institutions not covered by the existing resolution framework.
  2. Introduces an updated approach and tools to handle potential failure of banks, aligned with the bail-in principle, while maintaining practical feasibility for medium-sized banks.
  3. Clarifies that critical functions can be considered critical if their discontinuance impacts financial stability or critical services at regional level on a significant scale.
  4. When national insolvency and resolution frameworks achieve objectives comparably, preference should be given to the option that minimizes risk for taxpayers and the economy.
  5. Resolution authorities should find funding through resolution financing arrangements or DGS preferable to funding from Member States' budgets; the latter only under extraordinary circumstances.
  6. Extraordinary financial support should be granted only in extraordinary circumstances of systemic nature or very large economic turmoil.
  7. In deciding between resolution and liquidation, the option with lower overall costs should be preferred; if costs are similar, the option with fewer risks to the economy.
  8. Introduces a two-tier priority ranking for deposits: most deposits get higher priority over ordinary unsecured claims, with a lower tier for certain uncovered deposits and long-term deposits of large legal entities.
  9. Removes the DGS super preference, allowing DGS claims to rank with covered deposits, to enhance accessibility of DGS and SRF and reduce costs for taxpayers.
  10. Competent authorities may waive recovery plan updates for up to two consecutive 12-month periods.
  11. Resolution authorities must consider the risk that a prolonged process increases overall costs for customers and the economy when assessing reasonable timeframe.
  12. EBA shall report on the application of the public interest assessment three years after entry into force, and proposals or guidelines may be developed based on outcomes.

Who is affected

  • Banks and financial institutions in the EU, especially medium-sized ones, will face new rules on resolution and depositor preference.
  • Deposit guarantee schemes (DGSs) will see changes in their claims ranking and contribution limits.
  • Taxpayers will be better protected as the use of public funds is restricted to extraordinary circumstances.
  • Depositors, especially those with covered deposits and SMEs, will have higher priority in insolvency.
  • Resolution authorities and competent authorities will have new duties in assessing public interest and notifying failures.

Figures and deadlines

  • 12 months: period for recovery plan updates; waiver not granted for more than two consecutive 12-month periods.
  • 12 months: maturity threshold for deposits of legal entities to be in lower priority tier.
  • Three years after entry into force: EBA to provide a report on public interest assessment.

Legal basis: Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union