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Early intervention measures, conditions for resolution and funding of resolution action (SRMR3)

TA-9-2024-0326 · P9_TA(2024)0326 · PE753.695

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Parliament's amended version of the proposed regulation amending the Single Resolution Mechanism Regulation (SRMR) to improve early intervention measures, resolution conditions, and funding of resolution action. It specifies early intervention measures by the ECB, including replacing management and appointing temporary administrators, and enhances preparation for resolution by the Board. It adjusts the public interest assessment, clarifies extraordinary public financial support conditions, and aligns MREL rules for transfer strategies. It also updates rules on the Single Resolution Fund, including contributions, irrevocable payment commitments, and claims in insolvency.

Key points

  1. The ECB may apply early intervention measures when an entity meets specified conditions, including infringing requirements or failing to take remedial actions.
  2. Early intervention measures include requiring management to implement recovery plans, convene shareholder meetings, draw up action plans, change legal structure, remove senior management, or appoint temporary administrators.
  3. The ECB can appoint temporary administrators to replace or work with management, with powers specified at appointment, for a maximum of one year, renewable once.
  4. The ECB or national competent authorities must notify the Board of deterioration, and the Board can market entities to potential purchasers before resolution conditions are met.
  5. Resolution action is in the public interest if necessary and proportionate to achieve resolution objectives and winding up would not meet them more effectively.
  6. Extraordinary public financial support outside resolution is allowed only in exceptional cases, such as State guarantees, deposit guarantee scheme interventions, or winding-up aid, with conditions including solvency and temporariness.
  7. The Board sets MREL for transfer strategies based on criteria like size, business model, and assets to be transferred, with a floor of 13.5% of risk exposure and 5% of exposure measure.
  8. 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.
  9. The Board can defer collection of ex-ante contributions for up to three years if amounts are small, and extraordinary ex-post contributions are capped at three times 12.5% of the target level.
  10. The Board's claims against residual entities in insolvency have the same priority as national resolution financing arrangements, higher than deposits.
  11. The Commission must report on liquidity in resolution by 31 December 2024 and on internal loss transfer by 31 December 2026.

Who is affected

  • Credit institutions and investment firms in participating member states, including their subsidiaries and parent undertakings.
  • The European Central Bank, which gains direct powers for early intervention measures.
  • The Single Resolution Board, which gets new powers and responsibilities for resolution planning and funding.
  • Deposit guarantee schemes, which may contribute in resolution and winding up under specified conditions.
  • National resolution authorities, which must implement Board instructions and consult the Board before insolvency actions.

Figures and deadlines

  • 8% of total liabilities including own funds must be absorbed by shareholders and creditors before Fund contribution.
  • Fund contribution cannot exceed 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.
  • Temporary administrator appointment maximum 1 year, renewable once.
  • Common Equity Tier 1 instruments acquired as precautionary support cannot exceed 2% of total risk exposure amount.
  • Ex-ante contributions deferral up to three years.
  • Extraordinary ex-post contributions per year 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