EU Competences and Bank Resolution: Banking Union and SRM

Institute of Law

EU Competences and Bank Resolution:

Banking Union and SRM

Kern Alexander

Chair for Law and Finance

University of Zurich

Seite 1

Institute of Law

Starting point

? Financial crisis of 2007-2009: no effective resolution and recovery

regimes for banks or financial institutions

? Lack of predictable legal framework to reorganise or liquidate

distressed financial institutions leads to bailouts and disorderly adhoc restructurings

? EU member states lacked legal powers to undertake effective

recovery and resolution plans

? Financial Stability Board international standards

? EU Recovery & Resolution Directive (RRD): a ¡®minimum¡¯

harmonisation approach?

? Banking Union and SRM - a ¡®maximum¡¯ harmonisation approach

Bank Recovery and Resolution, Prof. Kern Alexander

Seite 2

Institute of Law

EU Competence issues

Meroni doctrine

Article 114 v Article 352 (TFEU)

Internal market principles:

art 63 (Free movement capital) EC 88/361

art 49 (right of establishment)

3

Institute of Law

FSB ¡°Key Attributes of Effective Resolution Regimes

for Financial Institutions¡±

? 2009 G20 Summit: FSB charged with proposing measures to mitigate

moral hazard of failing systematically important financial institutions

(SIFIs);

? ¡°Key Attributes¡± published in October 2011

? Key Attributes 2-3: resolution authority with power to initiate

resolution of a firm and thereby e.g. enforce

?

Changes in the firm¡¯s management, structure, or contractual obligations

?

Transfers of assets and liabilities to a third party or bridge institution

?

Writing-down equity and converting unsecured/uninsured creditor claims

into equity (bail-in)

? Key Attribute 6: privately-funded deposit insurance and resolution

funds to reduce taxpayer exposure

Bank Recovery and Resolution, Prof. Kern Alexander

Seite 4

Institute of Law

FSB ¡°Key Attributes of Effective Resolution

Regimes for Financial Institutions¡±: RRPs

? Key Attribute 11: domestically incorporated SIFIs should have robust,

credible, and regularly updated recovery and resolution plans (RRP);

for Global SIFIs (G-SIFIs): group resolution plan + cross-border

cooperation agreements + review of resolution strategies by the

competent authorities.

?

Recovery plan: identifies options to restore financial strength and

viability when the firm comes under severe stress

?

Resolution plan: facilitates resolution for competent authorities by

ensuring effective and feasible resolution of the firm, reducing

systemic disruption / taxpayer exposure

? Essential elements of RRP set out in Annex III

Bank Recovery and Resolution, Prof. Kern Alexander

Seite 5

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download