Response to consultation on draft Guidelines on triggers for use of early intervention measures

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Question 2: Do you consider the level of detail used in the draft Guidelines to be appropriate?

A wide range of financial institutions is subject to BRRD. The guidelines have to allow an appropriate approach under Article 27 BRRD for all those institutions. A higher level of detail in the guidelines would be impractical and could cause unintended repercussions.

Question 3: Do you have any comments on the proposed specification of early intervention triggers based on the outcomes of SREP?

The IMA agrees in principle with the approach to trigger early intervention measures based on the outcome of SREP, but supervisors will have to ensure a responsible and appropriate use of the tools provided by ESMA’s guidelines for common procedures and methodologies for the SREP. The SREP is designed with a strong focus on deposit-taking credit institutions. EBA’s draft guidelines for common procedures and methodologies for the SREP are not taking the provisions of MiFID and MiFIR into account. It is undeniable that asset managers, especially when they are of a grade of significance making them subject to BRRD have to provide a sound capital basis. However, the risk arising from a struggling asset manager is significantly different to the risk arising from a failing bank. At the same time, the reasons for difficulties are fundamentally different. Resolution authorities have to be able to take those differences into consideration when taking their decision on early intervention measures or choosing a specific early intervention measure. According to Article 27 Paragraph I BRRD infringements of the provisions under MiFID and MiFIR, can trigger early intervention measures. Where asset managers are subject to BRRD the resolution authorities should base their decision on early intervention measures mainly on those operational requirements.

Question 4: Do you have any comments on the proposed approach to use material deterioration or anomalies in key indicators in deciding whether there is a need to apply early intervention measures?

The proposed approach is a good starting point for defining triggers for early intervention measures with regard to banks. Where asset managers are subject to BRRD the guidelines will have to allow resolution authorities to adapt the key indicators to investment firms. The IMA would, therefore, propose to amend paragraph 21 of the draft guidelines accordingly. Not all areas stipulated in Article 27 Paragraph 1 are decisive for all institutions potentially covered by BRRD and the list of indicators which have to be monitored as a minimum may not be the most important for all institutions.

Question 5: Do you have any comments on the proposed description of significant events that should be considered as possible triggers for the decision whether to apply early intervention measures?

The IMA agrees with the approach taken in the guidelines. The list of significant events can only be an example and should be established and kept up to date by national competent authorities.

Question 6: Do you agree with our analysis of the impact of the proposals in this Consultation Paper? If not, can you provide any evidence or data that would explain why you disagree or might further inform our analysis of the likely impacts of the proposals?

No comment.

Name of organisation

Investment Management Association