European Banking Authority Consults on Changing the Basis for the Level of Resolution Financing Arrangements

The European Banking Authority launched a consultation on the appropriate reference point for setting the target level of resolution financing arrangements required by the Bank Recovery and Resolution Directive. The BRRD provides that when a bank fails, shareholders and creditors of the bank must be the first to bear losses. To ensure the effective implementation of the other resolution tools available, member states are required to have pre-funded resolution financing arrangements, contributions of which are made by the banks in each member state. The BRRD currently provides for contributions of at least 1% of the amount of covered deposits of all the banks in a given Member State by December 31, 2024. The BRRD requires the EBA to make recommendations to the Commission on whether the basis for those arrangements should be changed. The EBA is seeking feedback on its proposal to recommend to the Commission that the basis should be changed to one of: (i) total liabilities (excluding own funds) less covered deposits; (ii) total liabilities (excluding own funds); or (iii) total liabilities (including own funds).

Responses to the consultation are requested by September 2, 2016. The EBA must submit its report to the Commission by October 31, 2016. The Commission will assess the report and decide whether to submit a legislative proposal for changing the basis for the target level for resolution financing arrangements under the BRRD.

View the consultation paper. 

View the consultation page.