BRRD - Central Bank of Ireland

Report
Bank Recovery and Resolution Directive (BRRD)
Commission proposal published
June 2012
Publication of the Directive in the
Official Journal
12 June 2014
Directive
Entry into force
Latest possible date for introduction
of bail-in tool.
1 January 2015
2018
Next steps
The Council adopted the BRRD at the Economic and Financial Affairs meeting(ECOFIN) on
6 May 2014. Following this, the Directive was published in the Official Journal of the EU
on 12 June 2014 and will enter into force on 1 January 2015. Member States will have to
transpose the Directive by 31 December 2014.
Under the Directive, the European Banking Authority is obliged to draft approximately 30
binding technical standards and guidelines over the next 12-18 months, a number of
which are already under consultation. Under the Directive, Banks and national
competent authorities, i.e the Central Bank of Ireland, are required to draw up recovery
and resolution plans on how to deal with situations which might lead to financial stress
or the failure of a bank. If authorities identify obstacles to resolvability during the course
of this planning process, they can require a bank to take appropriate measures, including
changes to corporate and legal structures, to ensure that it can be resolved with the
available tools in a way that does not threaten financial stability and does not involve
costs to taxpayers.
The EBA previously adopted a formal Recommendation in January 2013 to ensure that
major EU cross-border banks develop group recovery plans by the end of 2013.
Overview
On 6 June 2012, the European Commission published a
proposal for a Directive establishing a framework for the
recovery and resolution of credit institutions and investment
firms.
The Directive will provide national authorities with common
powers and instruments to pre-empt bank crises and to
resolve any financial institution in an orderly manner in the
event of failure, whilst preserving essential bank operations
and minimising taxpayers‘ exposure to losses.
The main resolution measures include:
• the sale of (or part of a) business;
• establishment of a bridge institution (the temporary
transfer of good bank assets to a publicly controlled
entity);
• asset separation (the transfer of impaired assets to an
asset management vehicle)
• bail-in measures (the imposition of losses, with an order of
seniority, on shareholders and unsecured creditors).
In December 2013, the Council and European Parliament
reached agreement on a final compromise text of the
proposed Directive in trilogue negotiations. Some of the most
contentious issues in negotiation were the bail-in tool and
resolution fund. It was agreed that the bail-in provisions
which enter into force in January 2016, will enable resolution
authorities to write down or convert into equity the claims of
the shareholders and creditors of banks that are failing or
likely to fail.

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