Resolution framework

On 15 May 2014, the Bank Recovery and Resolution Directive (BRRD)  was adopted by the EU in order to provide national resolution authorities with comprehensive and effective powers for dealing with failing banks. This framework and related legislation enhances both the resilience and the resolvability of EU institutions and in-scope investment firms, which will be better prepared to deal with, and recover from, a crisis situation. Moreover, in the event that an institution does fail, the impact associated with that failure should be minimised.

Specifically, the framework brings about the following changes:

  • Credit institutions and in-scope investment firms are required to prepare recovery plans, which identify appropriate options that can be executed in the event of a significant financial deterioration of the institution, thereby reducing the likelihood of failure.
  • In addition, the BRRD grants a new set of early intervention powers to supervisors. These powers include the requirement for institutions to execute recovery options, the removal of management and changing the structure of the institution.
  • Resolution planning activity is undertaken by the Central Bank, or the SBR, in advance of failure to unsure this process is managed effectively.

  • If required, the Central Bank and the SRB have at their disposal a set of resolution tools that can be used to resolve failing institutions in order to minimise the impact of failure on the financial system, the real economy, depositors and taxpayers.

  • Both a national and a European resolution fund have been established to help finance the cost of resolution in the future.