Response to consultation paper on draft Guidelines on the interpretation of the different circumstances when an institution shall be considered as failing or likely to fail

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

It is, of course, useful to create supervisory convergence, but especially with regard to the conditions under which measures under BRRD apply the guidelines have to read in combination with national insolvency laws. Guidelines are, therefore, only useful for describing the desired effect the rules in the different member states may have. Prescribing the rules themselves could thwart the efforts to establish a level playing field. The IMA, therefore, considers the level of detail provided by the guidelines as appropriate. A more granular approach might be counterproductive.

Question 3: Do you consider the examples provided in Box 2 to be sufficiently clear and providing useful guidance?

The IMA has some doubts about the necessity of providing examples for situations in which an institution could be considered as failing or likely to fail. Every competent authority and resolution authority has to take national insolvency law into consideration when defining their benchmarks for recovery and resolution conditions. The examples provided in the draft guidelines are not suitable to help defining the triggers in a balanced way.

Question 4: Do you have any comments on the proposed specification of circumstances which should be taken into account by the competent authority in determining that an institution is failing or likely to fail?

Reiterating that the determination that the institution is failing or likely to fail should remain an expert judgement and should not be automatically derived from the list of objective elements, the IMA agrees with the approach taken in the draft guidelines.

Question 5: Do you reckon that a significant decrease in asset value can be predefined in a quantitative manner? If yes, which threshold would you suggest for that purpose?

The IMA would oppose to set a predefined threshold for a significant decrease in asset value. Very different institutions are subject to BRRD and a significant decrease in value of own assets is likely to have idiosyncratically different consequences for different banks.

Question 6: Do you have any comments on the proposed specification of objective elements related to the capital position which should be taken into account by the resolution authority in determining that an institution is failing or likely to fail?

The IMA has no additional comments.

Question 7: Do you have any comments on the proposed specification of objective elements related to the liquidity position which should be taken into account by the resolution authority in determining that an institution as failing or likely to fail?

The IMA has no additional comments.

Question 8: Do you have any comments on the proposed specification of the circumstances, related to governance arrangements, which should be taken into account by the resolution authority in determining that an institution is failing or likely to fail?

The IMA has no additional comments.

Question 9: Do you have any comments on the proposed specification of the circumstances, related to the institution’s operational capacity to provide regulated activities, which should be taken into account by the resolution authority in determining that an institution is failing or likely to fail?

The proposed specification of the circumstances, related to the institution’s operational capacity to provide regulated activities are not suitable for investment firms subject to BRRD. Investment firms subject to BRRD may have permission to hold clients’ money, but deposit-taking would not be their main business. National competent authorities and resolution authorities should have the possibility to lay out those specifications in an appropriate way for all kinds of firms subject to BRRD.

Name of organisation

Investment Management Association