EBA欧洲银行-EBA-GL-2014-09-28Guidelines-on-Public-Support-Measures29_15页_308kb

EBA Guidelines on Support Measures under Article 32(4)(d)(iii) of the BRRD Summary

Core Content

The European Banking Authority (EBA) issued Guidelines on the types of tests, reviews or exercises that may lead to support measures under Article 32(4)(d)(iii) of the Bank Recovery and Resolution Directive (BRRD) on 22 September 2014. These guidelines aim to clarify the conditions under which public financial support may be provided to credit institutions or investment firms without triggering resolution procedures.

Main Purpose

The guidelines are intended to:

• Define what constitutes a test, review, or exercise that could lead to public support measures.
• Establish main features of such tests and reviews, including timeline, scope, time horizon, reference date, quality review process, common methodology, macro-economic scenarios, and hurdle rates.
• Ensure consistent and effective supervisory practices across the European System of Financial Supervision (ESFS).
• Align with the BRRD's objective of avoiding the use of taxpayer money for resolving failing institutions.

Key Information

Article 32(4) of the BRRD

• An institution is deemed to be failing or likely to fail if it meets one or more of the following conditions:
  • Breach of continuing authorisation requirements.
  • Assets less than liabilities.
  • Inability to pay obligations when due.
  • Need for extraordinary public financial support (subject to exceptions).
• Exception: If an institution receives public support (e.g., capital injection) to address capital shortfalls identified through stress tests, asset quality reviews, or equivalent exercises, resolution should not be triggered as long as the support meets certain criteria.

Criteria for Public Support

• Support must be temporary and proportionate to address a serious economic disturbance.
• It should not confer an advantage to the institution.
• It must be granted only to solvent institutions.
• It should not be used to offset losses the institution has already incurred or is likely to incur.
• Support is subject to final approval under state aid rules.

Types of Tests, Reviews or Exercises

• Tests: Stress tests at national, SSM, or Union level, assessing resilience to adverse market developments.
• Reviews: Asset quality reviews assessing the accounting and prudential framework of institutions.
• Exercises: Tests or reviews conducted at Union level on a population of institutions across multiple jurisdictions, ensuring consistency, transparency, and comparability.

Main Features

• Timeline: Includes a launch date, deadline for results, and communication deadline.
• Scope: Must cover a material sample of institutions in terms of risks and assets.
• Time Horizon and Reference Date: Defined in the common methodology, influencing the timeframe for addressing capital shortfalls.
• Quality Review Process: Ensures thorough plausibility checks and may result in requests for revisions.
• Common Methodology: Includes macro-economic scenarios and hurdle rates to assess capital needs.
• Private Resolution: Institutions should address capital shortfalls through private means, such as capital increases, within a defined timeframe.

Implementation and Compliance

• These guidelines are binding on competent authorities, resolution authorities, and financial institutions.
• They must be implemented in national supervisory practices by 1 January 2015.
• Competent authorities must notify the EBA by 1 December 2014 whether they comply with the guidelines or provide reasons for non-compliance.

Accompanying Documents

Cost-Benefit Analysis

• The net impact of implementing the guidelines is estimated to be close to zero, as the guidelines align with existing supervisory practices and do not introduce new costs.
• The guidelines are designed to clarify, not to create new requirements.

Banking Stakeholder Group (BSG) Views

• The BSG supports the guidelines, emphasizing the importance of clear and objective criteria for triggering resolution.
• They believe that public support from tests or reviews should be treated as a recovery tool, not a resolution trigger, provided the institution meets capital requirements.
• They recommend that the definitions of tests and reviews should be clarified to exclude single-institution assessments and align with the BRRD wording.

Public Consultation Feedback

• Three responses were received during the public consultation.
• The main concerns included:
  • Clarifying the definition of tests and reviews to exclude single-institution assessments.
  • Ensuring public announcement of test and review results.
  • Strengthening the materiality requirement for the scope of reviews and exercises.
• The EBA addressed these concerns by:
  • Amending the definitions to exclude single-institution assessments.
  • Maintaining the flexibility of the scope and methodology.
  • Clarifying that the decision to publish results is at the discretion of competent authorities.

Conclusion

The EBA Guidelines provide clarity on when public financial support may be provided to institutions without triggering resolution. They emphasize private resolution, financial stability, and consistent supervisory practices across the EU. The guidelines are non-binding in nature but are expected to be fully implemented by competent authorities by 2015.