22 February 2019
The European Banking Authority (EBA) published today a Handbook on valuation for purposes of resolution. The Handbook, which is addressed to national and EU resolution authorities, aims at fostering the convergence and consistency of valuation practices as well as the interaction with independent valuers across the EU.
The Handbook, which is the result of close cooperation with national resolution authorities and the Single Resolution Board (SRB) intends to bridge the resolution regulatory approach with the valuation practices, by providing concrete guidance on the practical steps of the valuation process, on the specific valuation criteria applicable to the various resolution tools and, with a view to facilitating the adoption of an informed decision by the resolution authority, by indicating the content that is expected to be included in the valuation report. Whilst the Handbook covers both the valuation before resolution and after resolution (aimed to determine the no creditor worse off), it focuses on the valuation before resolution, thus supporting the resolution decision, which immediately impacts shareholders and creditors.
The adoption of the Handbook follows the regulatory activity carried by the EBA in the area of valuation for resolution (Regulatory Technical Standards (RTS) on valuation before resolution, RTS on valuation after resolution, RTS on valuation of derivative liabilities for purposes of bail-in and RTS on independent valuers) with the view to harmonising valuations carried out across the EU to support uniform resolution practices.
The adoption of the Handbook relies on Article 29(2) of Regulation (EU) No 1093/2010 establishing the EBA. Whilst it is not binding nor subject to comply/explain by the resolution authorities, the Handbook is an instrument to promote convergence of approaches, practices and processes.
The EBA, together with national resolution authorities and the SRB, is currently conducting additional work related to information and data aspects to support the valuation, with the aim of enhancing institutions' preparedness in this area.