EBA欧洲银行-Public-hearing-on-GLs-on-triggers_2014-11-10_27页_1019kb

Summary of Public Hearing on GLs on Triggers for Early Intervention and Resolution

Core Content

This document outlines the European Banking Authority's (EBA) public hearing on guidelines (GLs) related to triggers for early intervention (EI) and resolution in the context of the Capital Requirements Directive (CRD) and the Bank Recovery and Resolution Directive (BRRD). It focuses on the interplay between ongoing supervision and resolution processes, the criteria for applying early intervention measures, and the conditions for determining that a bank is failing or likely to fail.

Main Viewpoints

1. Interplay Between CRD and BRRD

• The CRD and BRRD work together to ensure a continuum and consistency in the supervision and resolution of banks.
• CRD sets requirements for authorisation, capital, liquidity, governance, and ongoing supervision (SREP).
• BRRD establishes a recovery and resolution framework with three pillars: preparation, early intervention, and resolution.

2. Triggers for Early Intervention

• Overall SREP score: A score of "4" or "F" can trigger early intervention.

• Material deterioration or anomalies in indicators: These may lead to a reassessment of the SREP score and the application of EI measures.

• Significant events: Examples include operational losses, asset quality issues, adverse court rulings, significant deposit outflows, reputational damage, and loss of management.

• When triggers are breached, competent authorities (CAs) must decide on EI measures. However, they may simplify the process if the situation is urgent.

3. Failing or Likely to Fail

• Determination of failure or likelihood of failure is based on three main areas: capital position, liquidity position, and other requirements for continuing authorisation.
• A determination of failure does not automatically lead to resolution; it must be in the public interest.

4. Role of Competent Authorities (CAs) and Resolution Authorities (RAs)

• CAs and RAs consult each other to make determinations.
• CAs provide information on supervisory and crisis prevention measures, and for institutions with SREP scores of “4” or “F”, they also provide additional data.
• RAs assess objective elements based on information from institutions and CAs.

Key Information

Triggers for Early Intervention

• Overall SREP score of "4" or "F".
• Material deterioration or anomaly in risk indicators.
• Significant events such as operational loss, asset valuation issues, adverse legal rulings, deposit outflows, reputational damage, and management changes.

Conditions for Resolution

• The institution must be failing or likely to fail.
• There must be no reasonable prospect of preventing failure through private or supervisory action.
• Resolution must be necessary in the public interest.

Determination Process

• CAs may determine failure based on:

  • Overall SREP score of "F"
  • Failure to comply with supervisory or EI measures
  • Non-implementation of recovery options
  • Valuation results showing asset/liability imbalance
  • Notification from the institution itself

• RAs use:

  • Objective elements such as capital and liquidity breaches
  • Governance and operational issues
  • Additional elements like funding cost increases, off-balance sheet risks, and macroeconomic developments

Way Forward

• Guidelines on triggers for early intervention and on failing or likely to fail are expected to be published in summer 2015 after public consultations.
• Guidelines on SREP procedures are expected in Q1 2015 following consultations between July and October 2014.

Conclusion

The document highlights the importance of a coordinated approach between supervision and resolution frameworks. It outlines specific triggers for early intervention and criteria for determining failure, emphasizing the need for timely and consistent actions by competent and resolution authorities to safeguard financial stability.