European Commission Adopts Technical Standards for Eligibility for Simplified Obligations under the Bank Recovery and Resolution Directive

The European Commission has adopted a draft Delegated Regulation under the Bank Recovery and Resolution Directive, setting out Regulatory Technical Standards specifying the criteria for assessing the impact of an institution's failure on financial markets, on other institutions and on funding conditions.

Under the BRRD, where a national regulator or resolution authority is determining whether to grant simplified obligations to an institution, it must assess the impact that the failure of the institution could have due to a number of factors specified in the BRRD. The European Banking Authority submitted final draft RTS to the European Commission in December 2017. The RTS adopted by the Commission set out a two-stage test based on quantitative and qualitative criteria to determine whether an institution is eligible for simplified obligations. Institutions meeting quantitative criteria at stage one must then meet qualitative criteria at stage two to be assessed as eligible.

The draft Delegated Regulation will now be subject to a three-month scrutiny period by the European Parliament and the Council of the European Union. Assuming no objections have been raised by the co-legislators during that period, the Delegated Regulation will then be published in the Official Journal of the European Union and enter into force 20 days later. Once in force, the delegated regulation will have direct effect across the EU and will replace existing EBA Guidelines on simplified obligations.

View the draft Delegated Regulation and Annexes.

View details of the EBA's final draft RTS.

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