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There is an emerging consensus among stakeholders to apply resolution more widely going forward, possibly through modifications of the public interest assessment. This briefing reviews the practice of the Single Resolution Board so far and presents some observations based on past experience and policy options that the legislators might want to consider as they set out to reform the resolution framework.

To efficiently resolve a bank that is failing or likely to fail, and for which resolution is deemed in the public interest, it is important that impediments that hamper its resolvability are removed. Noting the limited public disclosure of banks and the Single Resolution Board (SRB), this paper assesses improvements in resolvability of a sample of 72 eurozone banks based on some key indicators. The main findings suggest that resolvability has marginally improved since the SRB resumed its full legal ...

This note is prepared in view of an ordinary public hearing with the Chair of the Single Resolution Board (SRB), Elke König, which will take place on 23 March 2021. This briefing addresses the review of the crisis management framework; contributions to the SRF; resolvability assessments, following a European Court of Auditors report; the relationship with the United Kingdom; the EBA’s benchmarking of national insolvency regimes; and SRB publications, including the MREL dashboard for Q3, 2020, a ...

The COVID-19 crisis is a significant and exogenous shock to the EU corporate sector, with implications for the operations and funding of many businesses. We compare key indicators for the global financial crisis (GFC) and the current situation, and assess implications for the policy response. We find that while many policy actions taken in response to the GFC remain valid, the nature of COVID-19 suggests a more tailored response is appropriate, with support focused on sectors most directly affected ...

The first part of the paper considers the effects of pre-empting a resolution procedure for a troubled financial institution by a precautionary recapitalization as specified in Article 32 (4) (d) of the Bank Recovery and Resolution Directive (BRRD). Benefits are seen for the maintenance of systemically important operations of an institution with legally independent subsidiaries in multiple jurisdictions and possibly for the maintenance of lending in situations where an entire banking system is involved ...

Precautionary recapitalisation, a tool for public intervention in the banking sector defined in the Bank Recovery and Resolution Directive (BRRD), is consistent with the rest of BRRD and a legitimate instrument for bank crisis management. The conditions set for it by BRRD are restrictive and have so far been effective to prevent its inappropriate use on insolvent banks. Minor corrections to the legislative text are desirable to fix a few cases of poor drafting. Beyond these, there is no immediate ...

The paper conducts an analysis of the precautionary recapitalisation tool of article 32.4(d)(iii) of the BRRD, which gives Member States the ability to provide support to solvent banks with a capital shortfall highlighted by stress tests and asset quality reviews, in case of a serious disturbance in the economy. In doing so, the paper examines the relationship between precautionary recapitalisation, financial stability and a serious disturbance in the economy underlying how the absence of a clear ...

With the introduction of the Bank Recovery and Resolution Directive (BRRD), public capital contributions to insolvent banks should have become a thing of the past or at least an extremely unlikely eventuality. The supposedly exceptional precautionary recapitalisation of Banca Monte dei Paschi (MPS) seems to offer evidence of the contrary. Based on a review of the empirical literature and the resent resolution of Banco Popular and MPS, this paper argues that a precautionary recapitalisation facility ...

This study, commissioned by the European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs at the request of the JURI Committee compares the preventive insolvency restructuring regimes of various Member States and sets forth the scope of the Commission proposal for a draft Directive of 22 November 2016, the transposition of such proposal and policy recommendations in connection therewith.

Small and medium-sized enterprises (SMEs) constitute 99 of every 100 businesses, and employ two out of three employees in Europe. Some of them are high-growth firms that generate a disproportionately high number of new jobs. However, SMEs often face obstacles specific to their smaller size that can hamper their growth potential. The main recent initiatives undertaken to help European SMEs grow fall within the flagship initiatives of the Commission: the European Fund for Strategic Investments, the ...