17 December 2015
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on the content of business reorganisation plans and progress reports, as well as guidelines defining how to assess plans. The work has been developed within the framework established by the Bank Recovery and Resolution Directive (BRRD), which sets procedures for the recovery and resolution of credit institutions, investment firms and related entities across the EU.
The EBA defined details for business reorganisation plans that identify and address the causes of the institution's failure and set out how the institution will be restored to long-term viability. As explained in the EBA RTS, the reorganisation strategy should be prudent and take into account the strengths and weaknesses of the institution, the relevant market and the macro-economic situation.
A set of Guidelines jointly delivered with the RTS will guide both resolution authorities and competent authorities across the EU in assessing business reorganisation plans, and the appropriateness of the strategy contained within them. It will also look at their consistency with other public policy objectives and rules. Additionally, the Guidelines will include provisions on the coordination between resolution and competent authorities.
The Bank Recovery and Resolution Directive (‘BRRD') entrusts resolution authorities with a set of tools and powers to intervene in non-viable institutions. Where the resolution authority applies the bail-in tool to recapitalise an institution under resolution, the BRRD requires that the institution draws up a business reorganisation plan that restores the institution's long-term viability. Also, the institution will be required to submit a progress report twice annually throughout the process of reorganisation.
The draft RTS have been developed according to Article 52(12) and (13) of the BRRD, which mandates the EBA to (i) draft RTS to specify further the minimum elements that should be included in a business reorganisation plan, and the minimum contents of the progress reports; (ii) to issue guidelines to specify further the minimum criteria that a business reorganisation plan should fulfil for it to be approved by the Resolution and Competent Authorities.
These draft RTS will now be sent to the Commission to follow the regular process for adoption into EU legislation. The guidelines will be translated into all EU official languages. Their date of application will be set 3 months after the translations are published. Resolution and Competent Authorities will be invited to notify the EBA whether they intend to comply with these guidelines and, if not, explain why.