Shearman & Sterling LLP | Financial Regulatory Developments Focus | European Banking Authority Publishes Regulatory Technical Standards on Simplified Obligations and Waivers in Recovery and Resolution Planning
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  • European Banking Authority Publishes Regulatory Technical Standards on Simplified Obligations and Waivers in Recovery and Resolution Planning
    12/19/2017
    The European Banking Authority has published a Final Report and final draft Regulatory Technical Standards for the criteria to be used to determine whether institutions should be subject to simplified obligations for recovery and resolution planning under the Bank Recovery & Resolution Directive.

    Under the BRRD, national regulators and resolution authorities may apply simplified obligations for institutions if the failure of such institutions would not be likely to have a significant negative effect on financial markets, on other institutions, on funding conditions or on the wider economy. National regulators and resolution authorities must make an assessment of an institution's eligibility for simplified obligations by reference to: the nature of the institution’s business; its shareholding structure; its legal form; its risk profile; its size; its legal status; its interconnectedness to other institutions or to the financial system in general; the scope and the complexity of its activities; its membership of an institutional protection scheme or other cooperative mutual solidarity system; and any exercise of investment services or activities.

    The EBA's final draft RTS propose that national regulators and resolution authorities conduct a two-stage eligibility assessment to determine whether an institution is eligible for simplified obligations. At stage one, national regulators should select institutions that could potentially benefit from simplified obligations based on a number of quantitative criteria measured on the basis of a set of quantitative indicators (namely size, interconnectedness, scope and complexity of activities, and nature of business). The draft RTS contain a number of indicators to be used in assessing the quantitative criteria. At stage two, national regulators and resolution authorities should verify whether institutions selected as potentially eligible for simplified obligations in stage one also meet the qualitative criteria, namely the criteria of interconnectedness, scope and complexity of activities, nature of business, shareholding structure, legal form, legal status, membership of an IPS or other cooperative solidarity systems, risk profile and exercise of investment services or activities. The final draft RTS contain a minimum list of considerations that the authorities should take into account in assessing the qualitative criteria.

    The final draft RTS will be submitted to the European Commission for endorsement, following which there will be a three month scrutiny period for the European Parliament and the Council. Assuming no changes are made to the RTS, they will be published in the Official Journal of the European Union and come into force 20 days later.

    Alongside the Final Report, the EBA has also published a further report, which provides an overview of how national regulators and resolution authorities have applied the simplified obligations and principle of proportionality in recovery and resolution planning during the first few years following the entry into force of the BRRD.

    View the Final Report.

    View the report on simplified obligations and waivers in resolution planning.